Where to put my down payment?

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Glockenspiel
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Joined: Thu Feb 08, 2018 1:20 pm

Where to put my down payment?

Post by Glockenspiel » Fri Jul 31, 2020 12:32 pm

My wife and I are buying a new house next spring and currently have $160k stored over various savings/checking accounts earning next to nothing in interest. I previously had a Vanguard Prime Money Market account earning 1-2%, but recently that yield has gone to almost zero.

Are there any other types of accounts where I can safely put $150k to be used as a down payment for the next 9 months and earn a little interest until we close on a new house? Seems like not a good use to just keep them in low-interest savings or checking accounts until then.

7eight9
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Joined: Fri May 17, 2019 7:11 pm

Re: Where to put my down payment?

Post by 7eight9 » Fri Jul 31, 2020 12:46 pm

Marcus currently has a 7 month no-penalty CD at 0.90%.

Link --- https://www.marcus.com/us/en/savings/ne ... untType=CD
I guess it all could be much worse. | They could be warming up my hearse.

LittleMaggieMae
Posts: 260
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Re: Where to put my down payment?

Post by LittleMaggieMae » Fri Jul 31, 2020 12:50 pm

Would a local bank (or Credit Union or Savings and Loan) give you a "bonus" for moving that much money to them? Would you get a preferred customer % on a CD with that much money? When you buy the house - at least all the DP money will be in one place (and have been there long enough to not raise the question "where did this come from?") - so it will make the endless requests for "where's your money?" and the final Wire Transfer alittle easier (only one place to get the info/money).

shess
Posts: 519
Joined: Wed May 17, 2017 12:02 am

Re: Where to put my down payment?

Post by shess » Fri Jul 31, 2020 12:57 pm

Glockenspiel wrote:
Fri Jul 31, 2020 12:32 pm
My wife and I are buying a new house next spring and currently have $160k stored over various savings/checking accounts earning next to nothing in interest. I previously had a Vanguard Prime Money Market account earning 1-2%, but recently that yield has gone to almost zero.

Are there any other types of accounts where I can safely put $150k to be used as a down payment for the next 9 months and earn a little interest until we close on a new house? Seems like not a good use to just keep them in low-interest savings or checking accounts until then.
You put your down payment in cash instruments to preserve capital for the down payment, not to earn income. Within that decision, you can obviously choose to maximize your income, but keep in mind that the market is REALLY fair about cash returns. If you look at Bankrate.com and see Ally and CIT and Discover Bank and Marcus paying 1% or 1.05%, it's really unlikely you're going to find an equivalently-safe option out there paying 1.5% or 3%. In fact, if I say someone saying they would guarantee 3% on savings, I'd hold onto my wallet and start looking for the specific "out" which is letting this happen (if you can't find why it's happening, it's happening because it's not as safe).

As rates fell, I shifted a little more aggressively from savings to CDs and no-penalty CDs, because I think rates are likely to keep falling to the point where breaking those CDs will probably still pay off. Obviously longer CDs won't work well for this case. Ally's no-penalty CD currently has lower rates than Ally savings, but I expect that will change over the next few months. How those CDs work is that they hold their rate for 11 months, and you can withdraw without penalty after a week, so it's a way to lock in a specific rate for awhile.

majiaknight
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Joined: Tue Jan 26, 2016 2:55 pm

Re: Where to put my down payment?

Post by majiaknight » Fri Jul 31, 2020 3:48 pm

When I'm looking at $160K safe investment for 9 months, the first thing pops in my mind is to get checking/saving accounts opening bonus as most of them could be closed w/o penalty after you keep some money to avoid monthly charges for 6 months.

https://www.doctorofcredit.com/best-ban ... t-bonuses/

fbeca
Posts: 1
Joined: Fri Jul 31, 2020 5:15 pm

Re: Where to put my down payment?

Post by fbeca » Fri Jul 31, 2020 5:18 pm

I'm in a similar situation but I guess I would tolerate a bit of risk here...anyone thinks it's a good idea to have a blend of munis etf (I'm in high fed tax rate) and TIPPS ETFs to "park" some cash in August 2020?

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tennisplyr
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Location: Sarasota, FL

Re: Where to put my down payment?

Post by tennisplyr » Fri Jul 31, 2020 6:06 pm

A few years back I put the proceeds from our NY home sale in an Ally Savings accounts. A year later I used some of that to buy our current home all cash. All went smoothly online.
Those who move forward with a happy spirit will find that things always work out.

lakpr
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Joined: Fri Mar 18, 2011 9:59 am

Re: Where to put my down payment?

Post by lakpr » Fri Jul 31, 2020 6:40 pm

Consider Rewards checking accounts, and distributing that $160k into two or three financial institutions.

Lake Michigan Credit Union, for example, offers 3% on balances up to $15k per social security number. A few conditions to meet: electronic statements only, direct deposit of at least $50 per month (ACH deposits from other banks count!!), login at least 4 times a month, and do 10 transactions a month on the debit card (load amazon gift card $1 a pop 10 times).

That's 3% on $30k right there -- $900 per year.

More institutions like this: https://www.doctorofcredit.com/?s=rewards+checking

If you want more yield, sorry you gotta work for it. Passive investing will only get you that 0.9% max

shess
Posts: 519
Joined: Wed May 17, 2017 12:02 am

Re: Where to put my down payment?

Post by shess » Fri Jul 31, 2020 9:45 pm

lakpr wrote:
Fri Jul 31, 2020 6:40 pm
Consider Rewards checking accounts, and distributing that $160k into two or three financial institutions.
A counterpoint ... I once had our down-payment money working HARD, and, as a result, I got to spend a few days on the phone with various institutions trying to figure out how to get it all to a place where we could make our escrow deadline. We had the cash, I just hadn't considered that theory isn't identical to practice (in theory, it was all good to go and easy, but in practice there were minor issues). It all worked out, but in retrospect I'd have paid a few hundred dollars to make that easier, and that was many weeks of interest.

I'm not saying don't take advantage of such bonuses, just that you should consolidate with PLENTY of runway left. In fact, I'd consolidate to a local B&M account, if I had my druthers.

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