Funding a down payment with investments

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Funding a down payment with investments

Post by obgynkenobi » Thu Feb 13, 2020 8:34 am

My husband and I are thinking about buying a house in the next year or so (although we might delay it further).
We mostly use vanguard money markets as our "savings", but have been focusing more on investing money. Right now we have 26k in Bonds, , 60k in total international, and 100k in total stock market. We also have 60k in a money market, and 15k in a savings. We will obviously need more money if we end up buying a house, so my question is should I start selling some of the shares of the stocks ? We are going to obviously keep putting money away with each paycheck but curious what people think!

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Re: Funding a down payment with investments

Post by whereskyle » Thu Feb 13, 2020 9:00 am

First, your username is amazing. Second, if you intend to liquidate stocks to fund this purchase in a year, I think you should liquidate now. I would not rely on stocks for a purchase I intend to make within the next 5 years. While I do have equities in taxable accounts with an eye for big pre-retirement purchases, I accept that they are not reliable in the short term and may not be there whenever I might want them. If I were you, I would decide now how much I want my down payment to be, see if I can afford it without liquidating equities, and if I decided I wanted to liquidate, I would do it now, and put the money in a high yield savings account. How frustrating would it be to have to sell at a loss or postpone the purchase if you no longer feel comfortable liquidating on the eve of making the down payment? The consensus I've seen here is that your equity holdings should be destined for a longer term than one year. Any money you intend to spend within the next few years should be in a High-yield savings account.

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Re: Funding a down payment with investments

Post by Retiredron » Thu Feb 13, 2020 9:10 am

It would be good if you could provide a bit more information such as the price range of the homes you might be considering and the estimated down payment percentage you are considering (15%, 20%, etc.). I would not sell any stocks at this time (remember you will have to pay capital gains tax) until you have a clear view of the down payment amount range you are striving to save for. However, I would stop investing in new stocks and bonds in your taxable amount and put those $ into a savings account or MMF until you reach your down payment goal. Don't stop investing in stocks in your retirement accounts.

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Re: Funding a down payment with investments

Post by goingup » Thu Feb 13, 2020 9:16 am

How much do you need and when do you need it? :D

One solution would be to continue to save, adding it to the MM, and use that pool of funds.

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Re: Funding a down payment with investments

Post by hand » Thu Feb 13, 2020 9:30 am

To me this depends on whether you *need* to buy a house on a specific timeline, or *want* to buy a house eventually.

If you have to buy a house by Summer 2021, you are taking on real risk of investments losing value between now and then jeapordizing your ability to buy.

If you want investment returns to help fund a house eventually, and are willing to delay purchase if markets drop, stock investments might make sense (but still represent a risk in any reasonable house buying timeframe).

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