We want to buy the foreclosed property next to us. We really don't want to let it get away although it will sttttrrrrretch us.

We are approved for $30,000 with 30% down at 7.25% with a local bank. The $9,000 down will come from our $40,0000 retirement fund.

Or should we borrow the whole amount from our retirement fund at Vanguard?

I'm hoping to get the property for $25,000 plus $3,000 or less in closing costs.

Which would I be better off doing IYHO?

I wouldn't take more than the $9K from retirement. You can borrow for a home or property, not retirement.

In my opinion, I would get the loan with the bank and keep retirement intact as much as you can.

 Michelle, can you make any income from the property? Babs

Babs, Yes.

Actually our small church is looking for another place to rent. Currently we pay $105 a week for use of a classroom at the elementary school. Next month they are raising it $200 a wek because the janitor doesn't like having to show up for 2 hrs on Sundays lol., so he wants more money. My payment on the loan would be around $200 a month or less.

However the house has been stripped. The foreclosed people took the kitchen cabinets, all appliances, the carpeting, the fireplace, some of the wall paneling, and even the furnace. I'm not even sure they left the water heater. Before we could rent it out for living quarters to anyone else, obviously some work needs to be done.

I was just wondering if interest and penalties would be better than the interest paid to the bank plus $1700 in mortgage origination costs. (possibly ARM 5 yr., I need to look at the proposed paperwork from the bank. I wanted a fixed rate but what he quoted was 6 1/2 % ARM, then the paperwork came back at a higher rate, but I haven't seen it yet to see if it's fixed or not.)

Michelle, I have to agree with Erika.  You should take as little out of your retirement fund as possible.  You'll have to pay taxes on the early withdrawl.  I think it would be better to take as little as possible from the retirement fund, and slowdown on contributions if you have to until you have the mortgage paid off for the foreclosure.

Michelle, that sounds like a great place for your church. We rented a barn one time for church. Smelled wonderful but we enjoyed it so much. Had a big wood stove made from an old oil tank. sounds like a real find for you if this can work out. I will be praying for wisdom for you and DH on how to do this. Babs

Thanks so much Babs! Our realtor is coming over tonight. We need to decide wheher to put a low bid in now or hold onto it until the price drops.

 Michelle, keep us up to date on what is happening. Babs

I would discourage borrowing from your retirement account. You will pay a tax penalty on that, plus the interest on the loan. You also give up what that money would have earned in interest (compounded tax-free) in the meantime. Borrowing from a retirement account should be nothing less than an act of desperation, which is not the case here.

If you can get the house with a regular mortgage - and are really sure you want to do this - do it that way. That way if things "go south" on you you'll still have your retirement money. If you can't get the house with a regular mortgage, then that should suggest that maybe it's not such a good idea....

We're waiting for another price drop. It was 57,900 on June 8th, then dropped to 43,900 on July 8th, so the realtor thinks another drop is coming on August 8th. Then it should be in our ballpark.

If someone else gets it before us, that's ok. It just wasn't meant to be, then. God protects me from bad decisions often! But I don't have any wiggle room on my offer, so it is what it is, and they can accept or reject it