Regulations require 401(k) plan loans to be repaid on an amortizing basis over not more than five years, unless the loan is used to purchase a primary residence. Longer payback periods are allowed for these particular loans.
Evaluating the use of 401(k) plan loans for home purchases is complex, and plan loans may not be as attractive as mortgage loans. Plan loans do not offer tax deductions for interest payments as do most types of mortgages, home-equity loans and home-equity lines of credit. The impact on retirement progress for a loan paid back over many years can be significant. It is best to consult personal tax and financial advisors before taking such loans.