How to Cash Out My IRA Early to Pay My Mortgage Payment

You may withdraw from your Individual Retirement Account, or IRA, to pay off your mortgage at any time, but you will pay a 10 percent tax penalty unless you over age 59 1/2 or you qualify for an exemption. If you qualify for one of the exemptions, you can withdraw from your IRA without penalty even if you are younger than 59 1/2. The IRS allows individuals who are experiencing many types of personal emergency to withdraw from their IRA without penalties within certain limits.

Instructions

1

Consider withdrawing from your IRA despite the 10 percent tax penalty to make your mortgage payments. The money withdrawn will also count as taxable income and may push you into a higher tax bracket. This method is not advisable, but may be necessary if you are facing a financial emergency, such as foreclosure.

2

Determine if you qualify for an exemption for early IRA withdrawal. You may make a withdrawal from your IRA to pay your mortgage when you are making a first-time home purchase for a principal residence. Individuals qualify for this exemption if they haven't purchased a home in two years or more. You can also withdraw money from your IRA without penalty to cover medical expenses that are in excess of 7.5 percent of your income -- which might free up some cash to pay your mortgage. Or you or your heirs can withdraw IRA money without penalty if you become permanently disabled or die.

3

Take advantage of the separate equal periodic payments (SEPP) exemption to make mortgage payments. To do this, you must withdraw identical amounts of money at regular annual intervals over a period of five years or longer. This will exempt you from the 10 percent penalty on early withdrawals as long as you are at least five years younger than 59 1/2 years old.

4

Raid your IRA temporarily by taking advantage of the rollover rules to make your mortgage payments. The rollover rule allows you to completely liquidate your IRA without any penalty as long as you transfer the full amount withdrawn into another IRA within 60 days of the initial withdrawal. This will allow you to temporarily use your IRA funds to make mortgage payments.