401k loan for second home

This is a really thoughtful situation, and it's clear you genuinely care about both honoring your relationship with your family member and making a financially sound decision for yourself. A few things worth considering as you navigate this.

First, the fact that she's pricing it low is actually a gift in disguise, even if it stretches your finances. Waterfront properties in most markets are incredibly difficult to find at below-market prices, and if comparables in your area support a higher valuation, you're essentially getting built-in equity from day one. That's significant.

Regarding the 401k loan question — while it's an option, it comes with real risks. If you leave your job for any reason, the outstanding balance could be treated as a distribution, triggering taxes and penalties. Financial advisors generally recommend exhausting other options first.

Here's something worth exploring with your family member: owner financing. Since she's wealthy and not desperate for a lump sum, she may be open to carrying the note herself. You'd make monthly payments directly to her, potentially at a lower interest rate than a traditional lender would offer. This benefits both of you — she gets steady income, possibly better than what her cash would earn sitting in a savings account, and you avoid the 401k risk entirely. Owner financing arrangements on land and vacation properties are more common than most people realize, especially in family-adjacent situations like yours.

Alternatively, if she simply wants to sell land fast and move on cleanly, a cash offer — either from you with bridge financing, or through a third-party buyer — could close quickly without the complexity of a traditional mortgage on a vacation/second property, which lenders often scrutinize more heavily.

Also worth noting: since she's selling as-is and at a friendly price, make sure you still do proper due diligence. Get a title search, check for any easements or encumbrances on the waterfront property, and understand the tax implications of owning a second home in your state.

If at any point the deal doesn't come together between you two and she simply wants an as-is purchase with no hassle, direct land buyers can provide a fair cash offer quickly — sometimes within days. It might be worth knowing that option exists as a backup.

Whatever path you take, get everything in writing early. Even close family relationships benefit from clear documentation when real estate is involved.

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