Should I Use My Roth IRA For A First Time Home Purchase?

In my previous article discussing Roth IRAs, I briefly described what they are, their purpose as well as some advantages and disadvantages of a Roth IRA, mainly compared to the traditional 401K.

Upon doing this research I learned something about Roth IRAs myself. Which is, you can only withdraw money to purchase a home if it’s your first and you can only withdraw up to $10,000 as a one-time purchase without fee or penalty. I could see why this could be utilized today as cash is getting harder to save and the cost of housing keeps going up faster than we can even save our money for a down payment.

While I think this could be a helpful strategy to utilize, I would personally advise against it, especially if you are younger like me (this isn’t financial advice just my personal opinion for entertainment only). Because as younger people, that gives our money the most amount of time to compound versus if we were older. And maybe just started the account, our money wouldn’t compound at nearly the same rate. In simple terms, the opportunity cost for taking this money out at a younger age is way higher than doing this at an older age (most people at an older age have owned a home at some point so they may not qualify).

For that reason, my personal strategy would be to just have to PMI (private mortgage insurance) and make extra payments, as well as refinance the loan at a later date rather than losing out on all of that compound interest.