principal residence loan for 30 years?

[betheeg]

Plan alloes a loan term for 5+ years for purchase of a principal residence. Anyone ever heard of or used a 30 year term and does that qualify as "reasonable"? The examples I have found use 15 years.

Thanks.

[mbozek]

A 30 year loan would be reasonable only if it is likely that the employee would remain employed for 30 years which is highly unlikely in todays employment environment outside of public employers. Most employers limit home loans to 10 -12 yrs.

[Guest FormsRmylife]

In the same way that lending disclosure laws apply to plans with more than 25 loans, state loan laws can apply to your plan loan program. Since the loan is not actually secured by the residence, the loan cannot extend out like a real mortage. For example, my state limits loans unsecured by real property to 15 years. Due to the federalization of banking, your state may have a similar law.

[QDROphile]

Nothing prevents the loan from being secured by a mortgage except plan design or policy. No comment on maximum term.

[mbozek]

Forms: Why arent state lending laws preempted by ERISA because they conflict with the rules for investing plan assets? ERISA does not preempt other federal laws such as the truth in lending law. Plan can secure loan by mortgage on residence to allow the borrower to take a tax deduction on the interest (as long as the funds used for the loan do not come from salary reduction contributions).