How a Couple Used a 401(k) Loan and a Recast to Buy Before Selling and Lower Their Payment by Nearly $2,700

Outcome Summary

A move-up buyer couple used temporary 401(k) loans to buy before selling, then applied sale proceeds and recast their mortgage to reduce their monthly payment by nearly $2,700.

Borrower Snapshot

Location: Southern California
Buyer type: Move-up buyers
Purchase year: 2025
Strategy used: Buy before you sell
Temporary funding: 401(k) loans
401(k) structure: $50,000 borrowed by each spouse
Total funds accessed: $100,000
New home city: San Dimas, California
New home price: $900,000
Loan type: Conventional
Old home city: Covina, California
Sale proceeds: About $525,000
Principal applied to new loan: About $425,000
Mortgage strategy: Loan recast
Monthly payment reduction: Just under $2,700

The Situation

This couple wanted to move into a new home but were nervous about selling their current house first.

Their biggest concern was timing. They did not want to sell, struggle to find a replacement home, or risk being temporarily without a place to live. They also wanted the final monthly payment on the new home to stay within a comfortable range.

The Challenge

They needed a way to buy their next home without being forced to sell their existing home upfront.

They also wanted flexibility, not pressure, and a plan that would allow them to control the sequence of events.

The Strategy

The solution was a buy before you sell strategy using temporary funds.

1. Most 401(k) plans allow participants to borrow up to $50,000 or 50 percent of the vested balance, whichever is less.

2. In this case, each spouse borrowed $50,000 from their own 401(k).

3. This provided a total of $100,000 for the down payment on the new home.

4. The funds were intended to be temporary, not permanent financing.

Buying the New Home: San Dimas, California

In 2025, the couple bought their new home in San Dimas for $900,000.

They took out a conventional mortgage for $810,000 and moved into the home without selling their existing house first.

Selling the Old Home: Covina, California

After moving, they completed some work on their old home in Covina and listed it for sale.

When the home sold, they netted approximately $525,000 from the proceeds.

1. Both 401(k) loans were paid back immediately.

2. The remaining approximately $425,000 was applied directly to the principal balance of the new mortgage.

Recasting the Mortgage

After applying the large principal payment, they requested a loan recast.

A recast recalculates the monthly payment based on the new lower loan balance, without refinancing and without changing the interest rate.

The result was a monthly mortgage payment that dropped by just under $2,700.

The Result

Today, they are in the home they wanted, with the monthly payment they are comfortable with, and without having to rush any part of the process.

As they shared in their review, “If you’re nervous about selling your house and buying another house, talk to Armando Novelo. He will walk you through the process and will make sure it all works out.”

Why This Story Matters

Many homeowners assume refinancing is the only way to lower a mortgage payment after selling a home.

This case study shows how temporary funding, combined with a recast, can create flexibility without pressure or disruption.

What This Case Study Shows

Can buyers use 401(k) loans to buy before selling?

Yes. Many plans allow temporary loans that can be repaid after the sale of an existing home.

Is a recast the same as a refinance?

No. A recast lowers the payment without changing the rate or restarting the loan term.

Can this strategy reduce stress when moving up?

Yes. Buying first can remove timing pressure and allow for better decision-making.

Related Resources

Buy before you sell strategies·401(k) loan basics· Down payment basics · Mortgage recasting explained· Conventional loans