Author Topic: Saving for a House Downpayment  (Read 1224 times)

PARedbeard

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Saving for a House Downpayment
« on: November 11, 2015, 09:44:00 AM »
Greetings Mustachians!
DW and I were discussing the next three years over dinner at date night last night (half priced wings and drafts at a local place--delicious!). Since most jobs that my wife would qualify for are either in MD/VA or out west, we had originally purchased our house thinking that we would sell it after my wife gets her doctorate, and use that money as a down-payment on another place.

Now, I'm not so sure. We live in a large university town in central PA, where renting could be rather lucrative.

Here's the quick skinny on our place: End unit, 3 bed/1.5 bath townhome, $551/ mo mortgage, $100 HOA. Built in 1988, and we have renovated the entire house. The roof is 2 years old, but it will need siding in another year or so. One of the reasons the HOA fee is so high is down to the fact that it is saving to reside all the units at once. Unfortunately, due to the continuity of the buildings, we really can't reside our whole house independently.

Rent in neighboring houses w/o the finishes that ours has ranges between $950-$1075. We could probably get another $100/mo more for our place. Hence, I'm thinking about renting when we leave in 2-3 years and using a housing agent unless we end up settling nearby. If we go down that route, though, my current plan is out the window.

Here's my question: with bond and CD yields so low at the moment, where would you park money reserved for a downpayment? I know the Fed may raise rates in December, but even still, we wouldn't be making much more unless the Fed changes stuff substantially (which I doubt). My current thought is to buy into relatively non-volatile stocks with decent (3-4% ish) dividends and let that ride for three years. Does anyone else know about a Vanguard fund that might work well in this situation?

Lastly, what can you tell me about saving this in our ROTHs? Can we accumulate the money there and then use contributions for the downpayment, or should I just do this in my taxable account?

Any input is greatly appreciated!

AmandaS1989

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Re: Saving for a House Downpayment
« Reply #1 on: November 11, 2015, 09:56:08 AM »
Hey PARedbeard! If you use money from your ROTH you won't be penalized if you withdraw money for a first-time home purchase, so I'm guessing that might be a no-go. But you can still withdraw contributions tax-free. Here's a link for more:

http://www.schwab.com/public/schwab/investing/retirement_and_planning/understanding_iras/roth_ira/withdrawal_rules

Not quite sure as to the stock situation. If you need the money in around 3 years that's very short-term. If you're willing to risk it, go for it. Personally, I wouldn't put short-term money in stocks, but its up to you.