---
title: 'TSP Loan for a Home Down Payment: Rules and Real Costs'
slug: tsp-loan-for-a-home-down-payment
description: >-
  Thinking about a TSP loan for a home down payment? See the limits, the $100
  fee, what it cannot pay for, and why VA buyers often do not need one at all.
publishedAt: '2026-08-21T09:00:00.000Z'
updatedAt: '2026-08-22T00:00:00.000Z'
author: VeteranPCS
categories:
  - Financial Guidance
  - VA Loan Help
canonical: 'https://www.veteranpcs.com/blog/tsp-loan-for-a-home-down-payment'
componentSlug: financial-guidance
---
# TSP Loan for a Home Down Payment: Rules and Real Costs

Taking a TSP loan for a home down payment is one of the most common questions military buyers ask, usually about three weeks before closing when the cash-to-close number gets real. The Thrift Savings Plan, or TSP, is the federal government's retirement savings plan for civilian employees and uniformed service members, and yes, you can borrow from it to buy a home. Whether you should is a different question, and the answer for a lot of VA loan borrowers is no.

This guide covers the actual rules from [TSP.gov](https://www.tsp.gov/tsp-loans/), what the loan can and cannot pay for, and the one question to answer before you take money out of your retirement account.

## The Two Kinds of TSP Loan

TSP allows two loan types, and they are not interchangeable.

| | General purpose loan | Primary residence loan |
|---|---|---|
| Allowed use | Any purpose | Future purchase or construction of a primary residence, and only for costs still needed to close |
| Documentation | None required | Required |
| Repayment term | 12 to 60 months | 61 to 180 months |
| Processing fee | $50 | $100 |

![Comparison chart of TSP general purpose loans and primary residence loans showing term length and fee](/images/blog/tsp-loan-for-a-home-down-payment/tsp-loan-types.png)

*The residential loan buys you a longer runway. The general purpose loan buys you flexibility. Source: TSP.gov.*

The residential loan's long term is its real advantage. Spreading repayment over up to 15 years keeps the payroll deduction small. The general purpose loan has to be repaid in five years or less, which makes the monthly bite much larger for the same amount borrowed.

You may have only one general purpose loan and one residential loan outstanding at a time.

## What a Residential Loan Cannot Pay For

This is where most plans fall apart, and it is worth reading twice. A TSP primary residence loan can only be used for the future purchase or construction of a primary residence, and only for costs still needed to close.

Per TSP, you cannot use it for:

- Reimbursing yourself for money already spent, including earnest money or a deposit you already put toward your down payment
- Refinancing or prepaying an existing mortgage
- Building an addition onto your current home
- Renovations to your current home
- Buying out another person's share of your current residence
- Purchasing land only
- Purchasing a house you have already closed on

Read the first and last items together. If you close first and plan to backfill your savings with a TSP loan afterward, that is not allowed. The timing has to run the other direction, and the property must be one you or your spouse are purchasing in whole or in part.

Eligible property types include a house, townhouse, condominium, shares in a cooperative housing corporation, or a mobile home, as long as it will be your primary residence.

## Borrowing Limits

The minimum you can borrow is $1,000. The maximum is the smallest of three numbers.

- Your own contributions and the earnings on them in the account you are borrowing from, not counting any outstanding loan balance
- Fifty percent of the portion of your total balance made up of your own contributions and their earnings including any outstanding loan balance, or $10,000, whichever is greater, minus any outstanding loan balance
- $50,000 minus your highest outstanding loan balance during the last 12 months

![Illustration of the three TSP maximum loan tests with the smallest amount governing](/images/blog/tsp-loan-for-a-home-down-payment/tsp-loan-limits.png)

*An illustration only. TSP applies all three tests and the smallest result is your maximum.*

Two limits catch service members specifically. Agency and service contributions and their earnings cannot be borrowed, only your own. And money invested through the TSP mutual fund window is excluded from all three calculations, so if a chunk of your balance sits there, your borrowing power is lower than your account statement suggests.

You also need at least $1,000 of your own contributions and associated earnings, you must currently be in federal service or the uniformed services and in pay status, and you cannot have repaid a TSP loan in full within the past 30 business days.

## What It Costs

The costs are not obvious, because a TSP loan looks like you are just paying yourself.

The interest rate is the G Fund rate for the month before you request the loan, and it stays the same for the life of the loan. Check the current figure on the [TSP loans page](https://www.tsp.gov/tsp-loans/), since the G Fund rate moves month to month.

The processing fee is $100 for a primary residence loan. It comes out of the loan amount, you repay the full face amount, and the fee is never returned to your account.

The real cost is the one that does not appear on a statement. Money that leaves your TSP stops earning market returns while it is out. TSP puts it directly: you will be missing out on the compound earnings that money could otherwise have accrued. Over a 15-year residential loan, that gap can dwarf the $100 fee.

Repayment starts within 60 days of disbursement, through payroll deduction, and your payment amount is fixed for the life of the loan.

## The Risks Worth Knowing Before You Sign

Three scenarios turn a reasonable loan into an expensive one.

If your loan becomes delinquent while you are still serving, it becomes a "taxed loan." The taxable portion of the outstanding balance and accrued interest is treated as income by the IRS, and if you are under age 59 and a half you may owe an early withdrawal penalty tax on top. A taxed loan permanently reduces your account unless you pay it off.

If you separate from service with a loan outstanding, you have three options: keep paying by check or direct debit on a monthly schedule, pay it off by the deadline, or let it be foreclosed and accept the taxable portion as income. You cannot take a new loan after separating, and separated participants cannot repay a foreclosed loan.

If you go into approved nonpay status, payments are suspended but interest keeps accruing. The suspension lasts until you return to pay status or one year passes, whichever comes first. There is an important exception for service members: if you enter nonpay status from a civilian job to perform military service, payments are suspended for the entire period, and your maximum loan term is extended by the length of that service.

## The Question to Answer First

Before you touch your retirement account, answer this: do you actually need a down payment?

For most eligible service members and veterans, a VA loan requires no down payment and no private mortgage insurance. If the reason you are considering a TSP loan is the down payment itself, the VA loan may have already solved the problem. Start with [how a $0 down VA loan works](/blog/how-does-a-0-down-va-loan-work).

If the cash gap is closing costs rather than a down payment, there are cheaper ways to close it than borrowing from retirement. [Seller concessions](/blog/how-to-leverage-seller-concessions-to-lower-your-closing-costs) can shift thousands of dollars to the seller's side of the table, and knowing [what VA loan closing costs actually are](/blog/va-loan-closing-costs-what-military-buyers-pay) tells you how big the real gap is before you go looking for money.

There are still cases where a TSP residential loan makes sense. Buying above the amount your entitlement will cover without a down payment. Wanting to reduce the loan size to lower a payment on a tight BAH budget, where BAH means Basic Allowance for Housing, the monthly housing stipend tied to your rank, dependents, and duty ZIP code. Competing in a market where a down payment strengthens your offer.

Those are strategy decisions, not emergencies. Run them by both a lender and an agent who work with military families before you file the loan request. Our guide to [how much house you can afford on BAH](/blog/how-much-house-can-you-afford-on-bah) is a good place to pressure-test the numbers.

[Connect with a VeteranPCS agent](https://www.veteranpcs.com/contact-agent) to talk through whether a down payment helps your offer in your market, at no cost to you.

## Frequently Asked Questions

### Can I use a TSP loan for my down payment?

Yes, if it is a primary residence loan for a future purchase and the money goes toward costs still needed to close. You cannot use it to reimburse yourself for earnest money or a deposit you already paid.

### How much can I borrow from my TSP?

At least $1,000 and at most $50,000, minus your highest outstanding loan balance in the last 12 months, and further limited by your own contributions and earnings. TSP shows your calculated maximum when you log in.

### What is the fee for a TSP residential loan?

$100. It is deducted from the loan amount, you repay the full face amount, and the fee is never returned to your account. A general purpose loan is $50.

### How long do I have to repay a TSP residential loan?

Between 61 and 180 months, so just over five years up to 15 years. General purpose loans run 12 to 60 months.

### What happens to my TSP loan if I leave the service?

You can keep making monthly payments, pay it off by the deadline, or let it be foreclosed and accept the taxable portion as income. You cannot take a new TSP loan after you separate.

*This content is for informational purposes. Consult a professional for personal financial decisions.*

*Share this with someone weighing a retirement loan against a VA loan.*