Can a Roth IRA Be Used to Purchase a House Without Penalties?

by Maggie McCormick, studioD

A Roth IRA is meant to be an investment vehicle for your retirement, but you can actually use the money in the account at any time. In some cases, you'll incur a penalty for withdrawing the money before age 59 1/2, but purchasing a new home allows for some penalty-free withdrawals. Understand the rules regarding early withdrawals from your Roth IRA to avoid surprises.

Contributed Amounts

When you have a Roth IRA, you can withdraw your contributions to the account at any time, leaving the money that you've earned in the account to continue to grow. There is no penalty for this and you can withdraw any amount up to the full amount you've contributed.

First Home

To qualify for a penalty-free withdrawal beyond the contributed amount, you must be purchasing a "first home." In reality, this doesn't have to be the first home that you've purchased in your life, but it does have to be the first home you've owned within the past three years, according to Charles Schwab.


If you need more than your contributed amount for the home purchase, you'll be partially using the earnings of the money in your account. In this case, you can use up to $10,000 of the earnings in the account penalty-free. You can still withdraw more than this amount, but you'll have to pay a 10 percent penalty on the money.


Since you've already paid taxes on the money you've contributed to your Roth IRA, you will not have to pay taxes on the portion you withdraw that is the contributed amount. You will, however, have to pay taxes on any earnings that are not at least five years old.

Buying Together

If you're buying a home with a spouse or a close friend or relative, the IRA rules apply for each of you. You are both allowed to withdraw any amount up to the contributed amount, plus $10,000 penalty-free.

About the Author

Maggie McCormick is a freelance writer. She lived in Japan for three years teaching preschool to young children and currently lives in Honolulu with her family. She received a B.A. in women's studies from Wellesley College.

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