Down Payment Strategy for Primary Home

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Topic Author
LAguy818
Posts: 41
Joined: Sat Feb 21, 2015 2:57 am

Down Payment Strategy for Primary Home

Post by LAguy818 » Wed Jan 29, 2020 12:30 pm

Hi everyone,

Looking to buy a home with my soon-to-be wife in 2021. I am researching how to safeguard a down payment for a home in the $600k-$700k range.
Currently, I have $135k in a taxable account consisting of VTI and VXUS with $35k in unrealized gains.

I spoke with an advisor at Fidelity who advised me to take those gains now and park the cash in money market funds and CD ladders, but I wanted to check in to get advice before I take any non-reversible actions. I am currently located in CA, but looking to move to TX later this year and buy the home in 2021.

Thanks for your help!

Info:

My Income: $200k
Fiance's Current Income: $0 (founding a startup)
Planning to MFJ in 2020

Assets:
$500k single-family investment property (Purchase price $300k with VA loan)
Taxable: $135k with $35k unrealized gains (100% equity)
Roth IRA: $130k 90% equity allocation in index funds
401k: $160k 90% equity allocation in index funds
Cash: $40k (high due to saving for wedding expenses)

Location Now: CA
Location late in 2020: TX

edit: Fixed a word

Topic Author
LAguy818
Posts: 41
Joined: Sat Feb 21, 2015 2:57 am

Re: Down Payment Strategy for Primary Home

Post by LAguy818 » Wed Jan 29, 2020 12:51 pm

Also wanted to ask if a trailing stop loss would be appropriate in this situation.

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cheese_breath
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Joined: Wed Sep 14, 2011 7:08 pm

Re: Down Payment Strategy for Primary Home

Post by cheese_breath » Wed Jan 29, 2020 12:57 pm

You're making this way too complicated. How much do you want to pay down? Put that amount in FDIC insured savings and or CDs. Take it out in 2021 and get your house. Best wishes.
The surest way to know the future is when it becomes the past.

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Wiggums
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Joined: Thu Jan 31, 2019 8:02 am

Re: Down Payment Strategy for Primary Home

Post by Wiggums » Wed Jan 29, 2020 1:00 pm

LAguy818 wrote:
Wed Jan 29, 2020 12:30 pm
Hi everyone,

Looking to buy a home with my soon-to-be wife in 2021. I am researching how to safeguard a down payment for a home in the $600k-$700k range.
Currently, I have $135k in a taxable account consisting of VTI and VXUS with $35k in unrealized gains.

I spoke with an advisor at Fidelity who advised me to take those gains now and park the cash in money market funds and CD ladders, but I wanted to check in to get advice before I take any non-reversible actions. I am currently located in CA, but looking to move to TX later this year and buy the home in 2021.

Thanks for your help!
I agree with Fidelity. Money needed is less than five years should not be in equities. A high yield account, CDs and similar are more appropriate. Also, you currently have a house. We’re you planning to sell that? If so, use the equity as a down payment for the new house.

You didn’t ask this, but if you’re not familiar with Texas, it might be better to rent instead of buying a house, so you can get familiar with the area.

WhiteMaxima
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Joined: Thu May 19, 2016 5:04 pm

Re: Down Payment Strategy for Primary Home

Post by WhiteMaxima » Wed Jan 29, 2020 1:11 pm

Sell your aft-tax 135k now. It is still a paper value until you sell. Next year who know the 135k will become what. sell all of them and put in a CD. Done.

Topic Author
LAguy818
Posts: 41
Joined: Sat Feb 21, 2015 2:57 am

Re: Down Payment Strategy for Primary Home

Post by LAguy818 » Wed Jan 29, 2020 1:15 pm

WhiteMaxima wrote:
Wed Jan 29, 2020 1:11 pm
Sell your aft-tax 135k now. It is still a paper value until you sell. Next year who know the 135k will become what. sell all of them and put in a CD. Done.
Thanks for the concurrence. Do you think it would be worth it to use a trailing stop or should I just go ahead and sell everything?

Topic Author
LAguy818
Posts: 41
Joined: Sat Feb 21, 2015 2:57 am

Re: Down Payment Strategy for Primary Home

Post by LAguy818 » Wed Jan 29, 2020 1:17 pm

Wiggums wrote:
Wed Jan 29, 2020 1:00 pm
You didn’t ask this, but if you’re not familiar with Texas, it might be better to rent instead of buying a house, so you can get familiar with the area.
Ha, thanks. That's the plan so we can be in the area for house hunting, but also my fiance is from Texas and she used to live in the area we are moving too.

edit: clarification
Last edited by LAguy818 on Wed Jan 29, 2020 1:18 pm, edited 2 times in total.

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Wiggums
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Re: Down Payment Strategy for Primary Home

Post by Wiggums » Wed Jan 29, 2020 1:18 pm

LAguy818 wrote:
Wed Jan 29, 2020 1:17 pm
Wiggums wrote:
Wed Jan 29, 2020 1:00 pm
You didn’t ask this, but if you’re not familiar with Texas, it might be better to rent instead of buying a house, so you can get familiar with the area.
Ha, thanks. That's the plan so we can be in the area for house hunting, but also my fiance is from Texas and she is very familiar with the area we are moving too.
That’s awesome. Congratulations and good to both of you...

Topic Author
LAguy818
Posts: 41
Joined: Sat Feb 21, 2015 2:57 am

Re: Down Payment Strategy for Primary Home

Post by LAguy818 » Wed Jan 29, 2020 1:19 pm

Wiggums wrote:
Wed Jan 29, 2020 1:18 pm
That’s awesome. Congratulations and good to both of you...
Thanks!

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cheese_breath
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Re: Down Payment Strategy for Primary Home

Post by cheese_breath » Wed Jan 29, 2020 1:28 pm

LAguy818 wrote:
Wed Jan 29, 2020 1:15 pm
WhiteMaxima wrote:
Wed Jan 29, 2020 1:11 pm
Sell your aft-tax 135k now. It is still a paper value until you sell. Next year who know the 135k will become what. sell all of them and put in a CD. Done.
Thanks for the concurrence. Do you think it would be worth it to use a trailing stop or should I just go ahead and sell everything?
Didn't he just say sell it now? And to repeat myself, you're making this way too complicated. Sell it today.
The surest way to know the future is when it becomes the past.

Topic Author
LAguy818
Posts: 41
Joined: Sat Feb 21, 2015 2:57 am

Re: Down Payment Strategy for Primary Home

Post by LAguy818 » Wed Jan 29, 2020 1:35 pm

cheese_breath wrote:
Wed Jan 29, 2020 1:28 pm
LAguy818 wrote:
Wed Jan 29, 2020 1:15 pm
WhiteMaxima wrote:
Wed Jan 29, 2020 1:11 pm
Sell your aft-tax 135k now. It is still a paper value until you sell. Next year who know the 135k will become what. sell all of them and put in a CD. Done.
Thanks for the concurrence. Do you think it would be worth it to use a trailing stop or should I just go ahead and sell everything?
Didn't he just say sell it now? And to repeat myself, you're making this way too complicated. Sell it today.
Understood and thanks for your help. Going to take care of it before market close

soccerrules
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Re: Down Payment Strategy for Primary Home

Post by soccerrules » Wed Jan 29, 2020 1:36 pm

WhiteMaxima wrote:
Wed Jan 29, 2020 1:11 pm
Sell your aft-tax 135k now. It is still a paper value until you sell. Next year who know the 135k will become what. sell all of them and put in a CD. Done.
good plan here. You could see if you have any losses to sell to balance the gains. You could also look to sell come now and then Jan 2021 to split the CG between 2 tax years.
Don't let your outflow exceed your income or your upkeep will be your downfall.

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JoeRetire
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Re: Down Payment Strategy for Primary Home

Post by JoeRetire » Wed Jan 29, 2020 1:40 pm

LAguy818 wrote:
Wed Jan 29, 2020 12:30 pm
Looking to buy a home with my soon-to-be wife in 2021. I am researching how to safeguard a down payment for a home in the $600k-$700k range.
Currently, I have $135k in a taxable account consisting of VTI and VXUS with $35k in unrealized gains.

I spoke with an advisor at Fidelity who advised me to take those gains now and park the cash in money market funds and CD ladders
If you want to remove market risk, you should heed this adviser's advice.
It's the end of the world as we know it. | It's the end of the world as we know it. | It's the end of the world as we know it. | And I feel fine.

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cheese_breath
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Re: Down Payment Strategy for Primary Home

Post by cheese_breath » Wed Jan 29, 2020 1:50 pm

soccerrules wrote:
Wed Jan 29, 2020 1:36 pm
WhiteMaxima wrote:
Wed Jan 29, 2020 1:11 pm
Sell your aft-tax 135k now. It is still a paper value until you sell. Next year who know the 135k will become what. sell all of them and put in a CD. Done.
good plan here. You could see if you have any losses to sell to balance the gains. You could also look to sell come now and then Jan 2021 to split the CG between 2 tax years.
And if the gains have turned into loses before next January???
The surest way to know the future is when it becomes the past.

soccerrules
Posts: 1033
Joined: Mon Nov 14, 2016 4:01 pm

Re: Down Payment Strategy for Primary Home

Post by soccerrules » Wed Jan 29, 2020 2:09 pm

cheese_breath wrote:
Wed Jan 29, 2020 1:50 pm
soccerrules wrote:
Wed Jan 29, 2020 1:36 pm
WhiteMaxima wrote:
Wed Jan 29, 2020 1:11 pm
Sell your aft-tax 135k now. It is still a paper value until you sell. Next year who know the 135k will become what. sell all of them and put in a CD. Done.
good plan here. You could see if you have any losses to sell to balance the gains. You could also look to sell come now and then Jan 2021 to split the CG between 2 tax years.
And if the gains have turned into loses before next January???
sure - or if there are more gains?
I would likely go ahead and take the gains off the table now since there is a short time frame before needing to use the funds.
Otherwise I would rebalance to my AA if I had hit a threshold.
Don't let your outflow exceed your income or your upkeep will be your downfall.

Topic Author
LAguy818
Posts: 41
Joined: Sat Feb 21, 2015 2:57 am

Re: Down Payment Strategy for Primary Home

Post by LAguy818 » Wed Jan 29, 2020 6:48 pm

Whelp, gains are officially off the table. Thanks again everyone :beer

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