Author Topic: If we don't buy a house, what to do with down payment savings?  (Read 1705 times)

ysette9

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If we don't buy a house, what to do with down payment savings?
« on: January 11, 2015, 09:32:16 PM »
We have been planning on buying a "forever house" for the last 5 years and have been saving accordingly. Now that we are preapproved and starting to look at real estate, we are having some serious soul-searching discussions on why we are looking at buying, our goals, and how to achieve them. We are seriously considering not buying and renting instead, saving money, and reevaluating at a future date, perhaps when we can stop working all together. This is still a decision that is up in the air, but it does make me wonder: if we decide to keep renting, what should we do with the sizable amount of cash we have built up in a savings account that is earmarked for a down payment? Invest it? Invest some and keep some in cash or in a bond fund?

MDM

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Re: If we don't buy a house, what to do with down payment savings?
« Reply #1 on: January 12, 2015, 01:19:53 PM »
... if we decide to keep renting, what should we do with the sizable amount of cash we have built up in a savings account that is earmarked for a down payment? Invest it? Invest some and keep some in cash or in a bond fund?
Very much dependent on "for how long?" is your decision to keep renting.  One defensible course (among many) is to invest all of it now.  Then, if the market drops, just keep renting.  If the market rises, you could still rent - or decide at that time to buy.

GoldenStache

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Re: If we don't buy a house, what to do with down payment savings?
« Reply #2 on: January 12, 2015, 01:31:56 PM »
If you just signed a new lease or really thinking about it, invest all of it.  Buy VTSAX and keep saving up for buying a house but instead of putting it into your savings each month, buy more VTSAX.  It will go down and you buy, and then it will go up and you buy.. If you haven't maxed out any of your IRAs (if you can) I would do that first with $11k of the money (or $22K if you didn't do last years either).

ysette9

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Re: If we don't buy a house, what to do with down payment savings?
« Reply #3 on: January 12, 2015, 03:15:11 PM »
For now we are month-to-month though we are seriously considering moving to a nicer rental instead of buying a place. If we did move that would likely put us into a 1-year lease. We aren't eligible to deduct any IRA contributions due to income limits. After maxing out 401(k) contributions, all of our savings are now going into VTSAX. I might get comfortable with putting a portion of the down payment savings getting invested.

Of course you bring up a fabulous question of "how long" until we buy. The honest answer is that we don't have an answer to that. The long-term picture is I want to FIRE in 10 years from now. I could potentially see waiting to buy until we are done working. If that is the case then it makes sense to put it all in VTSAX. If not...... ?