To re-explain what the other response means for "time value of money"...

The extra tax would all be at once, right now, while the interest is paid over time. That means the interest you pay in year 7 costs you less in 2023 dollars thanks to inflation.

Meanwhile, presumably your remaining 401k balance continues to generate returns even as you draw it down. So, the 6/7ths of your mortgage balance you don't withdraw this year and instead let grow for a year, the 5/7ths the following year, etc., will go up in value each year, even if you just put it in an ultra-low- or no-risk investment product during that time.

These time effects on money converge, meaning the value of the money you have goes up over time, while the value of the money you owe goes down over time. Put them together, still ignoring any potential impact from bumping up your incremental tax rate, and the cost of 7 years of interest payments could be much less than simply calculating the interest due via spreadsheet.

Then throw in the potential for extra taxes if you liquidate the 401k all at once, and you might tip the scales over in favor of getting a mortgage.