The retirement account would hold the note (just like the bank) and upon sale the money plus interest would be repaid to the retirement account.

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The maximum loan by law is 50% of the vested account balance, and must be repaid within five years through payroll deductions.

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This is because the loan repayments, including the interest, will be repaid with amounts that have already been taxed and will be taxed when withdrawn from the retirement account.

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