Home Loan Refinance

[BTH]

A month ago, a participant receives a large participant loan and uses the funds to purchase a principal residence. However, the participant did not apply for the 15-year home loan exception, so the loan was set up with a standard 5-year amortization. Apparently, the participant was unaware of the option, even though it's clearly stated on the loan appication. Anyway, now the participant wants to reduce the monthly payments by switching to a 15-year amortization.

In looking through things, it seems like the only option here (besides telling him "no") would be for the participant to refinance the loan and since the original loan was in fact used for the home purchase, it should be allowable. But I'm not completely sure on this. Any thoughts or concerns?

Thanks.

BTH

[Belgarath]

I see no problem with what you propose - with the usual caveats - plan and loan policy must allow it, proper documentation necessary to prove valid principal residence loan, etc., etc.

[masteff]

I agree w/ Belgarath (including his list of caveats). The most relevant regs are in 1.72(p)-1 Q&A 5 thru 8. It's helpful for Q&A-8 to note that this is a refinancing of a plan loan and not of a mortgage.