We've run this math, and it almost never works. Take an illustrative $100,000 withdrawal from a 401(k). Under IRS rules a 10% early-withdrawal penalty takes $10,000 off the top. Because the distribution stacks on your regular income, a combined federal and state tax bite of roughly 40% (your actual rate depends on your bracket and state) can eat much of the rest, leaving you netting somewhere around $56,000 of the original $100,000. So you'd spend roughly $44,000 in taxes and penalties to knock a few hundred dollars a month off the payment. In that example the reduction lands around $320 to $340 a month, which comes nowhere close to justifying the cost. Nobody can promise where rates go, but the rate on any given loan isn't permanent. If rates later improve you can refinance, so we'd rather see you keep that retirement money working than burn tens of thousands to buy down a payment. A 401(k) loan you repay to yourself is a different and often reasonable tool. A taxable cash-out to beat a rate is the part that doesn't add up. Run your own numbers with a CPA before making the call.