principal residence loan term

[Guest terid]

Is there a maximum term for a principal residence loan? I have looked at the Section 72(p) and all I find is these loans are can be extended beyond the 5 years.

[2muchstress]

I'm not necessarily sure if there is a maximum, however all loans must be established pursuant to a written loan policy. The loan policy must state the maximum term available. I have seen many that use 15 years and many that use 20 years.

Just make sure it is in the loan policy.

[Blinky the 3-eyed Fish]

A loan used to acquire a prinicpal residence may be repaid over any reasonable period.

[Mike Preston]

There are many plans that seem to require the loan be repaid over a period not extending beyond NRA. I've never seen anything that demands such a short period, but there are those who are quite wedded to this idea. Something about it being fiduciarily unsound to provide a loan where the repayment period extends beyond the expected working lifetime. Again, that is not my view of things, just what some people seem to say to me when I question them.

If it is in the loan policy, however, I guess it becomes something that has to be followed.

[Kirk Maldonado]

The IRS dropped the position that a loan could not extend beyond the participant's normal retirement age many years ago. That point was confirmed (by the IRS) to the ABA in 1994.

[Mike Preston]

I know that the Q&A's since 2000 are available on a web site somewhere (I forget the link). Do you know if the Q&A you are referencing is available somewhere?

As I said, I long ago (probably in 1994 ;-)) gave up the concept that this is required. But it remains in the lore and a good cite to shoot it down every time it comes up would be worthwhile.

[Kirk Maldonado]

I'm not aware of them being publicly available anywhere. I'm just sensitive to that issue because I was the person that raised the question (through the ABA).