Where do I park the money for a house down payment

[kms]

Maybe this is going to be quick, maybe not. We're thinking about purchasing a house to live in around October / November. Currently, we're saving for a house down payment, between $4000-$6000 per month. We will definitely need all this money between late 2017 and mid 2018 so there's no room for any risk or money locked in some sort of long-term investment. Our savings account has an amazing 0.01% APY so where should we park the money in the meantime instead, any ideas?

[Bracken_Joy]

High yield savings account or a 6 month term CD. Don't put it anywhere it'll lose money, or you can't access it as needed. Don't expect to get much yield on it. That's the price of safety.

Nerd Wallet's recommendations: https://www.nerdwallet.com/blog/banking/nerdwallets-top-high-yield-online-savings-accounts/

[bryan995]

I just moved my down payment money over to ally bank online savings account.  1% interest. Also adding 4-6k/mo and hoping to make a purchase by end of 2017. So far things seem AOK and easy enough to move money back and forth.

[Tiger Stache]

Ally is probably your easiest option.

[Mr Mark]

Just make sure it is FDIC insured (limit is still $250k in a single account I think). Money market funds are typically not insured. They try to keep capital preserved, but in extraordinary situations they may not.

Please remember that - in holding cash or near cash equivalents - you are probably paying a significant premium (via uncollected dividends and capital gains) to insure yourself against an unlikely event (market "crash" just before you need the cash such that you can't put a deposit on the house you want to buy at that very moment).

This urge to protect yourself from a potential loss is totally normal, if irrational, btw and seems hardwired into our brains as humans https://en.wikipedia.org/wiki/Loss_aversion. Some have suggested the tendency of FIRE enthusiasts to come from the more 'engineering' backgrounds has something to do with the ability to protect yourself from this emotional bias through the power of logic and mathematics.

[kms]

I'm fully aware of the math, probabilities, and risk assessment in general. If this was a long term investment I wouldn't be asking but alas, this is money that we will need pretty soon. And with the current housing market in Austin even a six month delay due to a slight dip in the market can result in having to pay significantly more for the same house, which is where this loss aversion is coming from ;)

Thanks everbody, I'll look into Ally. Just did the math, compared to our current 0.01% APY an Ally account would net us $185 by October. I'm pretty sure that Bank of America is going to munch part of that away again in transaction fees so it might not be worth it in the end, we'll see.

[Mr Mark]

I'm fully aware of the math, probabilities, and risk assessment in general. If this was a long term investment I wouldn't be asking but alas, this is money that we will need pretty soon. And with the current housing market in Austin even a six month delay due to a slight dip in the market can result in having to pay significantly more for the same house, which is where this loss aversion is coming from ;)

Sorry kms,

I didn't mean to patronise you. It's just a very common question on the forum, and I wanted to make sure the 'qualifier' was there.  :-)

If the housing prices are accelerating that much, is it worth then buying earlier/now albeit with a temporary PMI or other short term loan?

[Bracken_Joy]

I'm fully aware of the math, probabilities, and risk assessment in general. If this was a long term investment I wouldn't be asking but alas, this is money that we will need pretty soon. And with the current housing market in Austin even a six month delay due to a slight dip in the market can result in having to pay significantly more for the same house, which is where this loss aversion is coming from ;)

Sorry kms,

I didn't mean to patronise you. It's just a very common question on the forum, and I wanted to make sure the 'qualifier' was there.  :-)

If the housing prices are accelerating that much, is it worth then buying earlier/now albeit with a temporary PMI or other short term loan?

There's a calculator that will help answer that =) http://www.mtgprofessor.com/calculators/Calculator6a.html

[greenmimama]

Lake MI credit union has a Max checking that yields 3% with some things you have to do every month but you don't have to live in MI check it out.

[NorthernBlitz]

You could try to use the money to chase sign up bonuses for banks. Would probably yield more than the 1% you'll get an an Ally or something.

There is some effort involved though, and it would probably only net you on the order of hundreds to thousands. The ones we've done usually require that you don't touch the money for between 3-6 months.