Refinance Loan

[Guest tajcc]

If a participant took out a loan in 2004 and now wants to refinance that loan and take additional money out, can the term of the loan be for a new 5 year period? No loan limits are being exceeded dollar wise.

So for example if the the loan taken in 2004 was taken for a five year period - so the loan would be paid off in 2009, has a current balance of $4,000.00.

Now December, 2006 the participant wants to refinance the existing loan and take out an additional $5,000.00. Can the loan be amortized over a new five year period - loan being for $9,000.00 paid off in 2011?

Thank you.

[Leopurrd]

No. the original loan must be paid off within 5 years (i'm assuming its not a residential loan) so the re-fi must be paid in full no later than 2009.

[QDROphile]

There is another way to skin the cat. You need to look at the regulations.

[Guest tajcc]

QDRO - would you care to enlighten me? I looked in the ERISA outline book and there is an example in there that seems to fit my situation, but I'm not sure if there are any catches to it.

[QDROphile]

Sorry, I am pretty tied up, and I am not inclined to be doing specific work anyway. Others may be more generous. The more sensible solution is to provide for another loan rather than refinance and end up with a single loan that has to satisfy two layers of requirements.