How to Withdraw From a 401(k) for a Mortgage

401(k) plans allow hardship withdrawals to purchase a main home and to prevent foreclosure.

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Withdrawals from 401(k) plans are tricky because unless you're 59 1/2 years old or you've left the company, you can't just take money out whenever you want. Hardship distributions can include a withdrawal to pay for costs to buy your main home, which includes a down payment and closing costs, but not mortgage payments. You can also use a hardship distribution to prevent foreclosure on your main home when you have no other way to come up with the money. Either way, if you are under 59 1/2, you most likely will be on the hook for the 10 percent early withdrawal penalty. And if you're trying to buy or save a second home, or your 401K plan does not allow for hardship distributions, you can't take a distribution at all.

Step 1

Request a 401(k) distribution form from either your 401(k) plan administrator or the financial institution that holds the funds. Sometimes, you can just download the form from the financial institution's Web site.

Step 2

Complete and submit the form to request a distribution. If you're at least 59 1/2 years old or aren't working for the company any more, you don't need to worry about qualifying for a hardship distribution. However, when you're still at the company and under 59 1/2, you must provide evidence of your hardship. If you're saving your home from foreclosure, that means a notice that you're being foreclosed on and the amount that is needed to prevent the foreclosure. If you're buying a home, attach copies of your mortgage and your contract to buy the home. You can also withdraw extra to cover income taxes and early withdrawal penalties incurred as a result of the distribution.

Step 3

Use the distribution to pay the mortgage arrears in foreclosure or the closing costs, including downpayment, associated with buying your home. If you need the money immediately, you may be able to request express delivery of the check or initiate a direct deposit into your account.

Step 4

Include the distribution on your income taxes. If you're already 59 1/2, the distribution adds to your taxable income and must be included on either Form 1040 or Form 1040A. If you're under 59 1/2, you also need to fill out Form 5329 to figure your 10 percent early withdrawal tax penalty. Withdrawals for mortgage payments, including those needed to avoid being evicted, don't qualify for an exception to the penalty. But, if you left the job after turning 55, that does get you out of the penalty.

Items you will need

  • IRS Form 1040 or 1040A
  • IRS Form 5329


  • You can get a loan from your 401(k) plan to purchase a home. There is no tax or penalty as long as you pay it back on time. Some people take this route, especially if they you do not qualify for a hardship withdrawal. Beware, however, of the following possibility: if you leave the job -- including getting laid off through no fault of your own -- you must usually repay the loan either immediately or within 60 days, depending on the terms of your loan.

Photo Credits

  • Jupiterimages/Creatas/Getty Images

About the Author

Mark Kennan is a writer based in the Kansas City area, specializing in personal finance and business topics. He has been writing since 2009 and has been published by "Quicken," "TurboTax," and "The Motley Fool."

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