Can You Withdraw From a Roth IRA To Purchase a Home?

Is taking money from your Roth to buy a first home worth it?

Two people looking a vacant apartment with a realtor

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Roth individual retirement accounts, or IRAs, are after-tax savings vehicles. While contributions to them are not tax-deductible like a traditional IRA, Roth funds can be withdrawn tax-free at retirement. They’re also very flexible investment tools that can accommodate almost any type of strategy.

Roth IRAs also can be used for other purposes, including funding the purchase of a first home. Learn what the IRS considers a first home, how to tap your Roth IRA, and what you should consider before you do so. 

Key Takeaways

  • You can withdraw your contributions to your Roth IRA at any time for any reason, although penalties can be assessed if the withdrawal is not among the exceptions allowed.
  • You can withdraw earnings penalty-free, but not necessarily tax-free, to purchase a first home.
  • Your Roth IRA may not be the best way to fund a down payment or other expenses; there may be more financially beneficial ways to source the money you need.

Can You Use a Roth IRA To Buy a House?

You can withdraw your contributions at any time for any reason, including the purchase of a home. Additionally, even if you are not age 59 ½, you can withdraw up to $10,000 of your Roth IRA account earnings penalty-free if you qualify as a first-time homebuyer. If you haven’t owned a home for at least two years, you qualify. For married couples, both spouses have to qualify.

Rules for Roth IRA Withdrawals


You can withdraw your contributions—but not earnings—anytime without tax or penalty.

Roth IRAs are designed to follow a “first in, first out” model. All distributions are treated as a contribution until withdrawn.  For example, if you had contributed $5,000 per year for five years, you could withdraw up to $25,000 in Year 6 tax- and penalty-free. Rollover money from other plans is considered to be a contribution.

Qualified Withdrawals Are Tax-Free

While contributions can be withdrawn tax- and penalty-free at any time, earnings can’t. As long as the Roth account is at least 5 years old and you are 59 ½ or older, any withdrawals from a Roth account are considered qualified distributions. Withdrawals that are qualified distributions are tax-free, including earnings. 


Distributions from a Roth IRA that are not qualified may be subject to a 10% tax.

Early Withdrawal To Purchase A New Home

If you are under age 59½, you can withdraw up to $10,000 of earnings from your Roth IRA penalty-free (but with tax implications) to buy a first home—it’s defined as such if you haven’t owned a home in the last two years. The money has to be used within 120 days to pay for “qualified acquisition costs,” which include:

  • Cost of buying, building or rebuilding a home
  • Settlement, financing, or other closing costs

Here’s an example of how a withdrawal for a new home might work:

Roth IRA account balance: $35,000

Contributions: $25,000

Earnings: $10,000

You could withdraw up to $25,000 tax- and penalty-free. Furthermore, if you qualify as a first-time homebuyer, you could withdraw the next $10,000 penalty-free, but not tax-free.  

Should You Withdraw From Your Roth IRA To Buy a House?

Drawing on your retirement savings is a major decision, so here are some points to consider.

Are You Meeting Your Retirement Savings Goals?

Taking money out of your Roth IRA will set your plan for retirement savings back. How long depends on how much you have saved. 


If you withdraw money from your Roth IRA, you’ll lose future tax-free earnings on the money you take out. 

Over time, that loss could be significant. For example, if you’re 35 years old, $10,000 accumulating at 6% interest for the next 30 years equals $57,435. 

Investing in Your Home vs. Other Investments

The average increase in the median price of a home has averaged 6.37% over the last 10 years. Meanwhile, the stock market, as measured by the Standard & Poor’s 500 index, has averaged 16.98% growth over the same 10 years.

Mortgage Interest vs. Investment Returns

With few exceptions, stock market returns in recent decades have been higher than mortgage rates. Generally, you would be better off borrowing the money, instead of withdrawing it from your Roth IRA and letting your retirement savings grow at a rate of return potentially higher than the interest rate you pay on your mortgage.

Private Mortgage Insurance

A down payment of 20% or more eliminates the burden of private mortgage insurance (PMI), which can cost anywhere from 0.30% to 0.70% of your mortgage balance each year. For example, if your mortgage is $300,000, your PMI cost would range from $900 to $2,100 annually if you can’t make a 20% down payment. Will your withdrawal be enough to cover the 20%? If so, how much will you be saving over time by avoiding PMI?

The Bottom Line

One of the advantages of a Roth IRA is flexibility. Unlike other types of retirement plans, once you reach age 59 ½, you can withdraw your contributions without tax or penalties at any time you’d like for any reason. For a younger person, the $10,000 penalty-free exception to purchase a first home provides an additional resource for a down payment or other homebuying expenses.

But tapping into your retirement savings for any reason can have real consequences down the road. Be sure to look at all of your financial options before you make a decision about applying Roth funds to a home purchase.

Frequently Asked Questions (FAQs)

When do I pay taxes on a Roth IRA withdrawal?

If the withdrawal is more than your contributions and is not a qualified distribution, it is taxable. If you are over age 59 ½, and the Roth account is more than 5 years old, the withdrawal is considered qualified. A withdrawal that isn’t a qualified distribution may be subject to an additional 10% penalty tax.

How do I report Roth IRA withdrawals?

Roth IRA withdrawals are reported to the IRS on Form 1040 and Form 8606. Form 8606 is used to report non-qualified distributions.

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The Balance uses only high-quality sources, including peer-reviewed studies, to support the facts within our articles. Read our editorial process to learn more about how we fact-check and keep our content accurate, reliable, and trustworthy.
  1. IRS. “Publication 590-B (2020), Distributions from Individual Retirement Arrangements (IRAs).”

  2. St. Louis Federal Reserve. “Median Sales Price of Houses Sold for the United States.” (Author’s calculation.)

  3. New York University Stern School of Business. “Historical Returns on Stocks, Bonds, and Bills: 1928-2021.” (Scroll to the bottom of Column 2, S&P 500 returns, to calculate the 10-year average.) 

  4. Freddie Mac. “30-Year Fixed-Rate Mortgages Since 1971.” (Compare mortgage rates with S&P 500 returns shown in Footnote 3.)

  5. Freddie Mac. “Breaking Down PMI.”

  6. Charles Schwab. “Roth IRA Withdrawal Rules.”

  7. IRS. “About Form 8606, Nondeductible IRAs.”

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