In 2005 a participant takes a plan loan to be used for the purchase of his primary residence, but elects to only carry the loan out for 5 years.

In 2006 the new house now comes with a new baby, and the participant would like to lower the payments on the plan loan.

Assuming the loan program allows for a 15 year payback on principal residence loans, is it possible to refinance the existing loan for 14 years, since the original loan could have had a 15 year payout? Or once the election was made for 5 years on the existing loan, is the participant stuck with that?

Thank you for any guidance.

I'm not sure there's a definitive answer on this. When reading 1.72(p)-1, Q&A 20, I'm inclined to lean towards the interpretation that what you propose is possible. But this is by no means crystal clear, and I could probably interpret it the other way as well. I'll be interested to see what opinions other folks have.

I have a vague recollection of the IRS saying informally that the refinancing loan is not a loan to acquire a residence. The residence has already been acquired.