<prompt> Human: My fiance and I are very financially stable. We are renting right now 1850month and are looking into purchasing a home. Basic information: Combined income: 200kyearCombined 401k: 150kCombined liquid savings: 130kTarget home price: 400kWe figured that we can borrow up to 50 of our vested 401k balance which will give us another 50k in liquid cash to have a combined total liquid cash of around 180k. 180k would be close to a 50 down payment for a home and we can probably end up getting a 5 year ARM rate which is considerably lower than 15 or 30 year fixed rate. I think we can pay off the rest of the 200k in 5 years if we prioritize paying off our mortgage higher than anything else. I personally think that getting that additional 50k helps in paying off the whole mortgage faster because thats 50k less that we need to worry about. However, after reading all the no, no, no, do NOT borrow from 401k statements here, I am actually feeling quite hesitant. Is the 50k worth it or should we really not be touching our 401k whatsoever? Wouldnt the 50k help with getting an even lower interest rate with our mortgage? Arent we saving 50k worth of interest rates paid to banks since were just paying that interest rate to ourselves?Assistant: A 401k loan is too risky for me. It should only be used to ward off foreclosure or some other calamity. If anything happens to your job, that entire 401k loan is due basically immediately. Youre losing future growth on that 401k while you pay it back to the account. Youre not paying the debt faster. Youre borrowing from your future self instead of borrowing from a bank. Interest on the 401k loan is not tax-deductible. Mortgage interest is. Youre paying the 401k loan with post-tax dollars i.e., youve already been taxed on that income. When you withdraw that money in retirement, youre going to get taxed again.Human: Youre losing future growth on that 401k while you pay it back to the account.Thats assuming that I dont factor the property value increase of the home that we purchase? If the home appreciates more than 8 assuming 8 return rate on 401k then isnt it still better to use the 401k cash? Youre not paying the debt faster. Youre borrowing from your future self instead of borrowing from a bank.Isnt this still better than giving a bank money? Interest on the 401k loan is not tax-deductible. Mortgage interest is.Is the tax deduction worth it though? I was always under the assumption that the longer you hold on the a property with interest, the more money you have to pay out. Wouldnt that ultimate accumulated interest payout negate whatever tax deductions I get? Youre paying the 401k loan with post-tax dollars i.e., youve already been taxed on that income. When you withdraw that money in retirement, youre going to get taxed again.Hm...this is a good point. So essentially, I get double taxed for the 50k...Assistant: 8 home appreciation is an unrealistic long-term assumption. That aside, the house would have to grow at the rate of interest on the loan plus the rate at which the money wouldve grown had you not taken it from the account for it to be a net-positive return. Considered with the point above and the double-taxation, yes, the interest deduction is another reason why borrowing from the bank is more valuable than borrowing from yourself.Human: Thanks for the insights!Edit: Just to add a little more color, I think we both have this irrational idea that we want as little debt as possible and borrowing from ourselves doesnt feel like as much of a debt as borrowing from a bank.  <response>: You know, you can always take a 30 year loan and pay it off in 5 years, if you choose one without pre-payment penalty, you only pay a little extra and you dont have to dip into your 401k.Or theres a type of loan that gives fix apr of like 2.5 for the first 5 years, then adjustable. That might be the best deal for you. 