Author Topic: Where to put down payment stash?  (Read 3280 times)

Lady Mustache

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Where to put down payment stash?
« on: October 04, 2012, 01:06:09 PM »
Hey friends!
I'm not ready to buy a house now -- renting is cheaper, and we might move to a new town in the next 2 years. But I've been saving for a down payment. I've had $40k sitting in a savings account for the past 6 years and the low interest rate is killing me.

It's going to be a few years before I'll be ready to buy a house and I am planning to add at least $24k to this stash. I want that money to be easily accessible. I want to get a decent interest rate. But if I invest it, I'm not excited about paying capital gains when I'm ready to use it. What should I do? Put it all in VTSMX and not worry about the tax? Keep it in savings? Buy a CD?

I'd love to know what the Mustachians recommend!

Thanks!
LM

arebelspy

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Re: Where to put down payment stash?
« Reply #1 on: October 04, 2012, 02:26:02 PM »
I typically recommend the stock market if the timing is flexible, something more secure (short term bonds, CDs, etc.) if it's fixed.

If you can wait out a dip in the market and purchase a year later than you planned, might as well go for maximum growth being my philosophy.

It really depends on your risk tolerance levels, investment timeframe, etc.

There's a few other discussions on this topic if you search the forums.
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RoseRelish

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Re: Where to put down payment stash?
« Reply #2 on: October 04, 2012, 03:41:24 PM »
You're going to pay tax on any interest...why does paying taxes on gains make you queasy? A tax bill means you made money!

Lady Mustache

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Re: Where to put down payment stash?
« Reply #3 on: October 04, 2012, 04:00:19 PM »
You're going to pay tax on any interest...why does paying taxes on gains make you queasy? A tax bill means you made money!

Good point! Thanks for the replies. I'll look around the forum for more info on this. I'm still pretty new at investing.

jpo

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Re: Where to put down payment stash?
« Reply #4 on: October 05, 2012, 06:55:40 AM »
I am also saving up a down payment. I have created a CD "ladder" such that they all mature at the end of my current lease.

It's not a great rate, but I won't lose principal and it's better than 0.09% from a savings account.

sibamor

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Re: Where to put down payment stash?
« Reply #5 on: October 05, 2012, 11:15:16 AM »
Do the mix: Stock/Bonds/CD's.

If you really wish to keep the money liquid or want to time the market put into CD's at staggered times. 1-2 months apart and for a variety of durations 3mo/6mo/1yr. The goal is to have one come due every 2 months so that if you needed to draw on 3-4k of funds you have it.  Then you can decide if its worth moving or rolling over into another CD.

Do research on Corporate and City Bonds.  There are an obscene amount out there that have conservative, moderate, risk returns.  Plus its nice when corporate bonds pay you that dividend.