Tapping Your IRA for a House
You can't withdraw funds from your account penalty free to pay off a mortgage.
 
My wife and I just bought our first house. Within a week after closing, we found out that you can use your IRA toward a first-time home purchase, and each person can withdraw $10,000 toward "qualified acquisition costs." We have an 80-10-10 mortgage (80% from the first mortgage, 10% second mortgage, 10% down). Can each of use withdraw $10,000 from our IRAs without paying a penalty if we put the money toward paying off the second mortgage?
Good idea, but the answer is no. You can't take an IRA distribution to pay off any mortgage, regardless of whether it's a first or a second loan.
First-time homebuyers (which the IRS defines as anyone who hasn't owned a house within the past two years) can avoid the 10% early-withdrawal penalty only if they use the IRA money to pay qualified acquisition costs for a principal residence before the end of the 120th day after withdrawing the money.
From just $107.88 $24.99 for Kiplinger Personal Finance
Be a smarter, better informed investor.
 
Sign up for Kiplinger’s Free Newsletters
Profit and prosper with the best of expert advice on investing, taxes, retirement, personal finance and more - straight to your e-mail.
Profit and prosper with the best of expert advice - straight to your e-mail.
Qualified expenses include acquiring, constructing or rebuilding a residence. Closing costs are covered, but paying off a loan isn't, says Greg Rosica, a tax partner with Ernst & Young. Nor can you withdraw the money after the fact and treat the distribution as though the cash had been used for the down payment you've already made, says Bob D. Scharin of Thomson Tax & Accounting.
For more information about rules for IRA withdrawals, see IRS Publication 590, Individual Retirement Arrangements.
Profit and prosper with the best of Kiplinger's advice on investing, taxes, retirement, personal finance and much more. Delivered daily. Enter your email in the box and click Sign Me Up.

As the "Ask Kim" columnist for Kiplinger's Personal Finance, Lankford receives hundreds of personal finance questions from readers every month. She is the author of Rescue Your Financial Life (McGraw-Hill, 2003), The Insurance Maze: How You Can Save Money on Insurance -- and Still Get the Coverage You Need (Kaplan, 2006), Kiplinger's Ask Kim for Money Smart Solutions (Kaplan, 2007) and The Kiplinger/BBB Personal Finance Guide for Military Families. She is frequently featured as a financial expert on television and radio, including NBC's Today Show, CNN, CNBC and National Public Radio.
- 
 The Social Security Test Every Wealthy Retiree Must Take The Social Security Test Every Wealthy Retiree Must TakeWhen you work and collect Social Security benefits before your FRA, you are subject to the Retirement Earning Test that could result in a temporary reduction of your benefits. 
- 
 I'm a Government Employee and Need to Get By Until the Shutdown Ends. What Can I Do? I'm a Government Employee and Need to Get By Until the Shutdown Ends. What Can I Do?The second-longest shutdown in history is leaving many federal workers with bills due and no paycheck to cover them. Here's what you can do to get by. 
- 
 Claiming the Standard Deduction? Here Are Five Tax Breaks for Retirement in 2025 Claiming the Standard Deduction? Here Are Five Tax Breaks for Retirement in 2025Tax Tips If you’re retired and filing taxes, these five tax credits and deductions could provide thousands in relief (if you qualify). 
- 
 IRS Names Its First CEO: But He’s Also Still Running Social Security IRS Names Its First CEO: But He’s Also Still Running Social SecurityTax News Will this new role make it difficult to address emerging issues like budget and staffing cuts and customer service concerns? 
- 
 IRS Phasing Out Paper Checks: What Happens After September 30? IRS Phasing Out Paper Checks: What Happens After September 30?Tax Changes Avoid delays when IRS tax refunds and Social Security paper checks are cut off. Here’s what to know. 
- 
 Ask the Editor, September 12: Tax Questions on 529 Plan Rollovers to a Roth IRA Ask the Editor, September 12: Tax Questions on 529 Plan Rollovers to a Roth IRAAsk the Editor In this week's Ask the Editor Q&A, we answer four questions from readers on transferring 529 plan money to a Roth IRA. 
- 
 Ask the Editor, August 29: Tax Questions on Estate and Gift Taxes Ask the Editor, August 29: Tax Questions on Estate and Gift TaxesAsk the Editor In this week's Ask the Editor Q&A, we answer questions from readers on estate and gift taxes. 
- 
 Will You Get a ‘Surprise’ Tax Bill on Your Social Security Benefits in Retirement? Will You Get a ‘Surprise’ Tax Bill on Your Social Security Benefits in Retirement?Retirement Taxes Social Security benefit payments might land you in hot water when filing 2025 taxes — here are three reasons why. 
- 
 Ask the Editor, August 8: Tax Questions on Roth IRA Conversions Ask the Editor, August 8: Tax Questions on Roth IRA ConversionsAsk the Editor In this week's Ask the Editor Q&A, we answer tax questions from readers on converting a traditional IRA to a Roth IRA. 
- 
 Ask the Editor, July 4: Tax Questions on Inherited IRAs Ask the Editor, July 4: Tax Questions on Inherited IRAsAsk the Editor In this week's Ask the Editor Q&A, we answer tax questions from readers on the rules on inheriting IRAs.