Saving for Home Down-payment

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Sloopik
Posts: 12
Joined: Mon Jan 07, 2019 8:50 pm

Saving for Home Down-payment

Post by Sloopik » Fri Jan 11, 2019 5:35 am

I'm looking for tips on how to quickly save for a 20% down-payment on a home. I don't have a savings problem, I'm able to save $1,500+/month. I'm looking specifically for where to PARK the money while I'm saving, that way I can shave a couple years off the process. Where should I keep it? What should I be invested in while I'm saving? Which investments are more effective for shorter-term goals specifically?

Nissanzx1
Posts: 605
Joined: Wed Jul 18, 2018 11:13 pm

Re: Saving for Home Down-payment

Post by Nissanzx1 » Fri Jan 11, 2019 5:49 am

We are doing this now. We use an online savings account with Discover bank. It paid something like $83 last month..

Since your timeframe is short, I'd resist the temptation to "invest" the money in stocks/mutual funds. In this environment, you could loose a significant amount in one day.

I'd challenge you to sharper the pencil even more. In my experience if you can save $1500/mo, you might actually find $2000/mo. Really tighten down the expenses... good luck.

jpelder
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Location: Charlotte, NC

Re: Saving for Home Down-payment

Post by jpelder » Fri Jan 11, 2019 6:06 am

You could use a CD ladder at a local or online bank (this can be complicated to set up, but some banks will help). You could use a high-interest savings account, either at a local bank or credit union, or at an online bank (people around here mention Ally, Discover, and CapitalOne, I think). You could also use a short-term, high-quality bond fund in a taxable brokerage account (this is what I did), but you do have to expect some fluctuations in principal with this approach.

zeal
Posts: 174
Joined: Tue Dec 11, 2018 4:28 pm

Re: Saving for Home Down-payment

Post by zeal » Fri Jan 11, 2019 6:18 am

We used a money market account at a local credit union (averaged about 1.75% interest). You won't get incredible interest, but the money is liquid when you need it--no hoops to jump through, easy to set up, and no CD penalties for early withdrawal. Now that we've bought our house this account is used for our emergency fund.

Topic Author
Sloopik
Posts: 12
Joined: Mon Jan 07, 2019 8:50 pm

Re: Saving for Home Down-payment

Post by Sloopik » Fri Jan 11, 2019 3:16 pm

Ok interesting. I thought the same thing potentially with investing and the pitfalls of short-term investing. I will look into a CD. If I know 100% that I won't need the money for another 2 years than maybe going with a high interest rate CD that locks you in for that time may be worth it.

Golf maniac
Posts: 290
Joined: Wed Dec 27, 2017 2:02 pm
Location: Florida

Re: Saving for Home Down-payment

Post by Golf maniac » Fri Jan 11, 2019 5:16 pm

Agree with CDs or high interest savings. Keep it safe.

barnaclebob
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Joined: Thu Aug 09, 2012 10:54 am

Re: Saving for Home Down-payment

Post by barnaclebob » Fri Jan 11, 2019 5:31 pm

You probably wont be able to take years off the process unless your horizon is over 10 years. Maybe months though. How much are your trying to save?

retire2022
Posts: 880
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Location: NYC

Re: Saving for Home Down-payment

Post by retire2022 » Fri Jan 11, 2019 6:23 pm

Sloopik wrote:
Fri Jan 11, 2019 5:35 am
I'm looking for tips on how to quickly save for a 20% down-payment on a home. I don't have a savings problem, I'm able to save $1,500+/month. I'm looking specifically for where to PARK the money while I'm saving, that way I can shave a couple years off the process. Where should I keep it? What should I be invested in while I'm saving? Which investments are more effective for shorter-term goals specifically?
Sloopik I did it in 1997-2000 with PBHG Technology and Communication fund, turned 10K turned in 70K. I got out then the internet bubble popped. I can't see how you won't be able without some risk.

Topic Author
Sloopik
Posts: 12
Joined: Mon Jan 07, 2019 8:50 pm

Re: Saving for Home Down-payment

Post by Sloopik » Fri Jan 11, 2019 6:26 pm

barnaclebob wrote:
Fri Jan 11, 2019 5:31 pm
You probably wont be able to take years off the process unless your horizon is over 10 years. Maybe months though. How much are your trying to save?
I'm trying to save roughly $30-40k for a 20% down-payment on investment property. Would just like to know if there's a recommended faster way to save than the old-fashioned way.

barnaclebob
Posts: 3839
Joined: Thu Aug 09, 2012 10:54 am

Re: Saving for Home Down-payment

Post by barnaclebob » Fri Jan 11, 2019 6:29 pm

Sloopik wrote:
Fri Jan 11, 2019 6:26 pm
barnaclebob wrote:
Fri Jan 11, 2019 5:31 pm
You probably wont be able to take years off the process unless your horizon is over 10 years. Maybe months though. How much are your trying to save?
I'm trying to save roughly $30-40k for a 20% down-payment on investment property. Would just like to know if there's a recommended faster way to save than the old-fashioned way.
Nope, your timeline is about 1.5 to 2 years. The only meaningful way to reduce that is to gamble or contribute more. Stick to online savings accounts or at the most risky, bond shorter term bond funds.

iamone
Posts: 7
Joined: Thu Sep 06, 2018 9:05 am

Re: Saving for Home Down-payment

Post by iamone » Fri Jan 11, 2019 6:42 pm

If your overall marginal tax rate (state+federal) is high, consider tax exempt money market or short term bond funds. You can compare a CD yield with a tax exempt fund here: https://personal.vanguard.com/us/funds/ ... alentyield

For example, the yield on NY municipal money market fund is 1.44%, which is equivalent to 2.06% @ 25% Federal tax bracket. If you use limited term tax exempt bond fund, you get an after tax yield of 2.71% @ 25% Federal bracket. This will help you compare taxable investments like savings and cds with tax exempt choices. My emergency fund is split between the two funds I listed above. Hope this helps.

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