Funds for a down payment on house

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macreel
Posts: 12
Joined: Fri Mar 30, 2018 4:14 pm

Funds for a down payment on house

Post by macreel » Mon May 07, 2018 7:51 am

Buying a house in 5 years. Income very stable and will not need the money. What are your suggestions? Leave it in my savings account, CD, bond funds, or another safe fund?

Therapist Investor
Posts: 210
Joined: Sun Apr 15, 2018 8:57 pm

Re: Funds for a down payment on house

Post by Therapist Investor » Mon May 07, 2018 8:00 am

I have my house downpayment and emergency fund in the Vanguard Prime Money Market Fund (VMMXX). It's been earning about 2% and will continue to rise as the Fed raises rates. Also, VMMXX keeps your funds completely liquid. It's easy to transfer your money to your bank and the share price is set to stay at $1.

There are many past posts on this topic. A quick google search should turn up a lot of past threads. Other posters have discussed using high yield online savings accounts from Ally Bank, Discover, etc. Those options also keep your cash pretty liquid. You can also look into CDs or buying T-Bills, but that locks your money away for a set amount of time.
"Get what you can, and what you get hold, 'Tis the stone that will turn all your lead into gold." | -Benjamin Franklin

daheld
Posts: 700
Joined: Wed Sep 13, 2017 8:14 am
Location: Midwest US

Re: Funds for a down payment on house

Post by daheld » Mon May 07, 2018 8:01 am

You're going to get a variety of answers around here, but most will recommend CDs/CD ladders or money market funds. Vanguard Prime Money Market Fund is a favorite here, and right now it yields 1.85%. You're going to hear different things, but I'm likely a little more conservative than some on BH, and in my opinion, that's about as good (in recent years) as you can ask for for money you know you will need in a few years.

This is the fund I stashed our down payment in, though before that I did keep it in a "normal" money market account with PNC for too long.

KlangFool
Posts: 14177
Joined: Sat Oct 11, 2008 12:35 pm

Re: Funds for a down payment on house

Post by KlangFool » Mon May 07, 2018 8:39 am

macreel wrote:
Mon May 07, 2018 7:51 am
Buying a house in 5 years. Income very stable and will not need the money. What are your suggestions? Leave it in my savings account, CD, bond funds, or another safe fund?
macreel,

Unless you are in New Jersey,

1) Max up your Trad. 401K account contribution.

2) Put your tax saving into you and your spouse's Roth IRAs.

3) 5 years later, withdraw the Roth IRA's contribution to pay for the house's down payment.

Please read the following:

https://www.bogleheads.org/wiki/Roth_IR ... gency_fund

KlangFool

User avatar
Shazb0t
Posts: 46
Joined: Thu Oct 06, 2016 11:06 am

Re: Funds for a down payment on house

Post by Shazb0t » Mon May 07, 2018 10:56 am

KlangFool wrote:
Mon May 07, 2018 8:39 am
macreel wrote:
Mon May 07, 2018 7:51 am
Buying a house in 5 years. Income very stable and will not need the money. What are your suggestions? Leave it in my savings account, CD, bond funds, or another safe fund?
macreel,

Unless you are in New Jersey,

1) Max up your Trad. 401K account contribution.

2) Put your tax saving into you and your spouse's Roth IRAs.

3) 5 years later, withdraw the Roth IRA's contribution to pay for the house's down payment.

Please read the following:

https://www.bogleheads.org/wiki/Roth_IR ... gency_fund

KlangFool
What is the caveat about New Jersey?

KlangFool
Posts: 14177
Joined: Sat Oct 11, 2008 12:35 pm

Re: Funds for a down payment on house

Post by KlangFool » Mon May 07, 2018 11:10 am

Shazb0t wrote:
Mon May 07, 2018 10:56 am
KlangFool wrote:
Mon May 07, 2018 8:39 am
macreel wrote:
Mon May 07, 2018 7:51 am
Buying a house in 5 years. Income very stable and will not need the money. What are your suggestions? Leave it in my savings account, CD, bond funds, or another safe fund?
macreel,

Unless you are in New Jersey,

1) Max up your Trad. 401K account contribution.

2) Put your tax saving into you and your spouse's Roth IRAs.

3) 5 years later, withdraw the Roth IRA's contribution to pay for the house's down payment.

Please read the following:

https://www.bogleheads.org/wiki/Roth_IR ... gency_fund

KlangFool
What is the caveat about New Jersey?
Withdrawal of Roth IRA contributions might be taxable by the state.

KlangFool

boglewill34
Posts: 161
Joined: Thu Nov 16, 2017 12:52 pm

Re: Funds for a down payment on house

Post by boglewill34 » Mon May 07, 2018 11:39 am

5 year treasury note is currently paying 2.75%. If you aren't likely to have FOMO if rates go up and don't want to fiddle with a ladder, that seems like a good parking spot.

manedark
Posts: 242
Joined: Sun Apr 22, 2018 2:05 pm

Re: Funds for a down payment on house

Post by manedark » Tue May 08, 2018 1:11 am

I am in a similar situation. Since the fed is almost certain to raise rates does it make no sense to invest portion of this money in bonds - I was considering CA tax exempt Muni bonds to save high CA tax.

TexMexIndex
Posts: 34
Joined: Wed Mar 28, 2018 12:38 pm

Re: Funds for a down payment on house

Post by TexMexIndex » Tue May 08, 2018 5:07 am

I'm in a similar situation, but willing to take some risk, and in 2016 put my house down payment into a retirement 2020 account.
My thought is even in 2022 if I lost a little, I would be more likely to earn 6% annually after5 years. Money Market would only get me .5-2.0% for
that timeframe.

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