Author Topic: Seeking help about placement of money (short term)  (Read 363 times)

swami

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Seeking help about placement of money (short term)
« on: March 16, 2021, 06:36:01 PM »
Hey,

Long time lurker here seeking the advice of the kind and reflected people of this community.

Iím in a situation where I am going to sell half of my apartment to my SO. The apartment is valued at 395k with 263k remaining on the mortgage. The sale will provide me with 197k. The bank is asking me to pay a minimum of 117k to them, leaving me with 80k to place as I see fit. Now to the problem. We will probably be looking for a bigger house within 1 or 2 years. In such a scenario I would need some of that 80k to go towards the down payment. In other words the money should be easily accessible. With that in mind it would make sense to keep the money within the housing market. However I am in a position where my interest rate on the mortgage is only 1,35 including all costs (not fixed). This will probably go up a little bit with time, but still be considered very low.

What would you have done with the 80k in a situation like that?

Other relevant info: I do not have any other sorts of debt. As far as possessions goes I have about 45k in a taxable brokerage account. I also live in a country where 401ks, HSAs and similar accounts doesnít exist.

Thank you for taking the time to help me out:)

RWD

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Re: Seeking help about placement of money (short term)
« Reply #1 on: March 16, 2021, 08:06:37 PM »
Savings account and/or CDs are good options for money you have short-term plans for. I use Ally Bank but there are other similar online banks with decent interest rates.

cool7hand

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Re: Seeking help about placement of money (short term)
« Reply #2 on: March 17, 2021, 05:56:36 AM »
Someone posted this list recently: https://www.doctorofcredit.com/high-interest-savings-to-get/. No idea of its bona fides.

ericrugiero

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Re: Seeking help about placement of money (short term)
« Reply #3 on: March 17, 2021, 07:40:20 AM »
First, I don't know anything about your situation or relationship so what I'm going to say is based on generalities.  Owning an apartment/house with someone you aren't married to is a really bad idea.  If your relationship goes sour, that makes things WAY more complicated.  It would be much simpler and cleaner to just charge your SO a reasonable rent which you can either invest or put toward your mortgage.  I hope it works out for you, but I strongly recommend against it.  I know that's not what you asked.  Hopefully you don't mind my two cents. 

Now on to your actual question.  What is the interest on your mortgage?  It might make sense to put the extra money toward the mortgage and build up more equity in the apartment.  I see a few possible options:
-  High interest savings account, money market or CD.  These are paying less than inflation at the moment.  It's a safe place to park money but you aren't gaining anything. 
-  Invest in stocks/bonds.  Long term, this is likely the right play but it's risky.  What if the market is down when you want to buy?  Sometimes the best home prices happen when the market is down.  Most people don't recommend stocks for short term savings like you are considering because of this risk.  Your timeline is on the short end of where I would start to consider this option. 
-  Pay down your mortgage.  You would be saving whatever % interest your bank is charging.  This almost guaranteed to be higher than anything you can get from a savings account right now.  The down side is that your money is less accessible.  Also, if your SO has a mortgage you have additional risk.  What if they don't pay their mortgage?  Will you be able to pay both?  If not, the bank could foreclose. 

Personally, I wouldn't buy property together until married.  If we forget that condition, in your situation I would probably pay down the mortgage.  That's guaranteed savings at whatever your interest rate is.  Not being in the US, your interest rate is likely higher than what we can get here (the government keeps the rates low).