I'm only 33, and the 401K loan automatically takes money out of each paycheck until it's repaid. I believe it was a 72 month loan? Might've been shorter. So, pretty sure it won't be a problem before I retire.
Of course, if an exigent circumstance comes up, and I can prove it (medical emergency, bankruptcy), it's possible to borrow the other half of the 401K. But if I'm short on the mortgage, it's not going to help me, so it was still somewhat irresponsible of me.
The problem is for people that take out a loan, then decrease their monthly 401k contributions to cover the loan payments. Also, while your money is out on loan, it isn't gaining value from the market (on the other hand, it is at least gaining the percent interest that you are paying back in -- so from the fund's perspective, it isn't too bad).
If you don't mind a question ... I was thinking about taking out a loan again once it was paid off in order to pay my house mortgage down to 78% so that I can knock off the $200/mo PMI. If I then contributed $200/mo toward the loan + 401K, do you think that would be better or worse than just leaving the 401K alone and paying the PMI? The PMI will probably take another 6+ years to fall off on its own, due to the criminally lopsided interest-to-principal amounts that 30-year mortgages start off at.
(I realize the absurdity of asking financial advice here, but you seem to know your stuff, so why not? ;)
I was actually thinking the same thing for myself (similar situation with PMI). But there is one additional danger with 401K loans. If you lose your job or quit, your loan is due within 60 days. Otherwise it is counted as an early withdrawal, so you owe a 10% penalty to the IRS, plus you get to pay taxes on the loan balance.
Also, check with your bank -- in my case, PMI will automatically stop at 78%, but once you get down to 80% you can initiate a request to remove PMI. Another option is if the housing market has improved, your house has more value. So if you are at least one year into your loan you can go through a refinance process where your PMI loan to value is assessed based on the current market value of your home. But again this can backfire, as the market value is based on the appraisal that the bank does. So you will have to make sure your house is in shape to sell to get a good appraisal.
My suggestion for you (which I would not give on /r/personalfinance) is that you actually try running the numbers on that - it should be fairly straightforward. Look up "amortization" if you need to.
Of course, if an exigent circumstance comes up, and I can prove it (medical emergency, bankruptcy), it's possible to borrow the other half of the 401K. But if I'm short on the mortgage, it's not going to help me, so it was still somewhat irresponsible of me.