Can I take a participant loan from my solo 401k plan for 15-year or 30-year term if I use the funds for the purchase of my primary residence even though there will be no mortgage or bank loan on the property. The reason there is no loan is that either a) the house is purchased all cash using the 401k loan funds or b) the seller is caring the note for the home purchase.
The Code does not state that in order for the solo 401k participant loan to qualify under the primary residence loan term payment exception where the 401k plan loan can be paid over a period longer than 5 years a mortgage is required. Therefore, understanding in the industry is that as long as the 401k loan is for the purchase of a primary residence, the repayment term could be either 15-year or 30-year repayment term (based on the general loan terms in your local area). IRC Section 72(p)(2)(B)(ii) says that 5-year max does not apply to principal residence loans (but does not provide a higher max). Lastly, the solo 401k plan documents would also need to include language allowing for the 15 or 30 year 401k participant loan term payment period.