Best Cash Storage

[REatc]

My girlfriend and I will be moving in 2-4 years and will be selling our current condo. We would like when we sell to move with enough cash for a down payment of 100k~ on a nice up to 500k house. With current equity we would need about an additional 75k~  saved to reach 100k~. I am in a dilemma on where to store cash.
We already have an emergency fund, as well as online saving account and a brokerage account. Currently Ally is paying 1.0%~ for the high yield saving account, our mortgage interest is 5.125%. Doesn’t it make sense to pay extra into the mortgage to get a 5.125% return vs 1.0% for Ally, even if we don’t have immediate access to the fund, I don’t care about money being locked in until you sell. Additionally, I don’t want to store extra cash into the brokerage account since it’s only VTSAX, and since I had a weird thought of money can only go into this account and not be touched for 10 years so compounding can do it’s thing. I’m not opposed to putting it into VTSAX, I’m fine with volatility, I’m just worried about withdrawal from the taxable account.
Is any of this rational and make any sense? If I didn’t ask the question I would probably just pay into the mortgage for the guaranteed return. Thoughts?

[MDM]

My girlfriend and I will be moving in 2-4 years and will be selling our current condo. We would like when we sell to move with enough cash for a down payment of 100k~ on a nice up to 500k house. With current equity we would need about an additional 75k~  saved to reach 100k~. I am in a dilemma on where to store cash.
We already have an emergency fund, as well as online saving account and a brokerage account. Currently Ally is paying 1.0%~ for the high yield saving account, our mortgage interest is 5.125%. Doesn’t it make sense to pay extra into the mortgage to get a 5.125% return vs 1.0% for Ally, even if we don’t have immediate access to the fund, I don’t care about money being locked in until you sell.

Yes, if the choice is between an investment (not an e-fund) earning 1% vs. paying 5.125% on a mortgage (and you expect to sell the condo before needing the proceeds), then paying down the 5.125% mortgage is better.  You might also check into no-fee refinancing, whatever else you do now.

Additionally, I don’t want to store extra cash into the brokerage account since it’s only VTSAX, and since I had a weird thought of money can only go into this account and not be touched for 10 years so compounding can do it’s thing. I’m not opposed to putting it into VTSAX, I’m fine with volatility, I’m just worried about withdrawal from the taxable account.
Is any of this rational and make any sense?

Yes, the bit about "money can only go into this account and not be touched for 10 years so compounding can do it’s thing" is somewhat weird.  Not completely weird, because paying a 5.125% mortgage vs. investing for a possibly-higher-but-also-possibly-lower return is not the clear cut decision that 1% vs. 5.125% is.

Does all that make sense?

[MissPeach]

I've made something like 30% on my index fund the last few years. The market is outpacing my savings account by far. If you are OK with paying capital gains and with some risk you will likely make more in 2-4 years but it's not a guaranteed payout. I would just make sure to time it correctly to make it long term capital gains for anything you're putting into the brokerage account.

If you really want to go the savings route for a guaranteed, insured account, you'll probably do best with the online banks. Discover and a few other banks have 1% right now. I would also shop around for CDs and think about a CD ladder. Last I checked the interest rates weren't too compelling but if you don't need it for 2-4 years you might be able to get more interest that way.