What to do with downpayment $?

[robbie3982]

DH and I are going to save all of our wedding money for when we''re ready to make a down payment on a house. What''s the best thing to do with it until we''re ready to use it? We''re looking to buy within a year...

We''re both pretty clueless since neither of us has ever had this much money before. DH didn''t even have a savings account until I moved in.

Any advice?

 

[Independent Gal]

If you''re planning to use the money within the year, you shouldn''t invest it in the stockmarket because although over time stocks may have a nice, upward trend that, if you choose well and diversely, will outstrip what you make in a savings account, you don''t want to be in a position where you have to cash out on the day the market just happens to go way down.

So... you have two basic options:

1) Open a high interest savings account. I use the Orange Account with ING (www.ingdirect.com) and I think it pays about 4.5%. You should shop around though and see if you can do better. Just don''t use your bank''s everyday savings account because they''ll probably pay you about 1.5%

2) Buy a Certificate of Deposit (aka a ''CD''). This basically means that you agree to loan the bank your capital for a set period of time (say, 6 months, 9 months, a year, 5 years) and they agree to pay you interest for it. This is usually at a slightly higher rate than a savings account, but because you loaned your capital to the bank, you won''t have access to it until that period is up.

SO, the smartest thing, if you can handle a little hassle, would be to buy a 6 month CD (if you don''t think you''ll buy before then) and have it cash out into a high interest savings account.

If you''re really not sure and you might be buying 4 months from now, just open the high interest savings account. It''s only a difference of about 1%, so unless we''re talking about a crazy LOT of money, it''s no big deal.

Hope that helps!

 

[Independent Gal]

One more thing. You could always mail it to meee and I''ll promise to take gooooood care of it. Very good care.

 

[ljmorgan]

Indie Gal just gave you the exact two suggestions that I was going to make. Definitely high yield savings (ING, and BoA has a 5.71 right now with a 25k minimum) or a 6 month CD. I might suggest the high yield savings over the CD just because the interest rates will be so close, and with the savings your money won''t be tied up -- so if you find something a few months early, you can jump on it.

 

[MichelleCarmen]

Hi,

I would do a CD. My husband and I sold our rental house about four months ago and now are refinancing our current house and paying down our mortgage with the rental procedes. We're also taking part of the money and setting it aside for the dreaded taxes we are going to owe

. We decided to do a CD and are working with our local credit union. For 6 months, we're getting 5.01%. That probably isn't the highest, but it's really really safe and that is what I care more about.

Good luck.

 

[snlee]

I recommend a high yield savings, such as ING or E*Trade. E*Trade''s complete savings account is at 5.05% APY right now. The only reason I wouldn''t recommend a CD is because you may need to money sooner then 6 months or a year. You don''t want your money to be tied up when you need it for a down payment.

 

[Miranda]

You''ve been given great advice. I''d go with a big bank right now. B of A, ING, Countrywide Bank, etc.

 

[scarleta]

You may want to read S Orman book on this topic.You were already given lots of good tips, I have no more to add.S Orman book would be good to read for both of you...

 

[dutch]

Use resources such as Bankrate.com, Kiplingers.com, Money.com, etc to research rates. I wouldn''t put your money in a cd. The nationwide average for a 6 month cd is only 4.79%. You can do better with an online savings accounts, some with intro rates as high as 5.25%. Keep in mind the Fed cut by 50 basis points yesterday, so these will come down soon.

 

[laine]

If rates are likely to come down, then in theory, that means this would be a good time to lock into a CD with a good rate.

Like the others, I think a high yield, online savings account is your best bet. I have one with igobanking, at 5.3%. Its my understanding that ING remains popular because its the most user friendly even though its not the best rate, but I haven''t had any problems with my account with igo, though the set up process was a little slow (had to get some approval thingy snail mail to finish set up). igo banking also has an 8 month cd at 5.4%, which is probably one of the better rates you''ll find.

If you do do a CD instead of a high-yield savings, make sure it isn''t variable rate (changes with prime rate), as that sort of defeats the point of locking into a higher interest rate.

 

[rockzilla]

One more thing to add for CDs - if you decide to go that route - be VERY careful, as many will automatically renew within 10-14 days of expiring. This happened to a friend of mine...almost all her savings were in a CD, but she lost track of the renewal date and the money was locked in for another year. She ending up borrowing cash from her parents, because there would have been a huge fee to take out the money "early" from the CD.

High-yield savings account is easier and more liquid.

 

[Regular Guy]

Lot''s a smart guys here, and good advice being shared.

I''ll second both Dutch''s and Rockzilla''s comments. Bankrate.com is good for knowing where the good rates are. But, if you want to just work locally...or work any-ways....if a CD, look out for auto roll overs..if you''re not Johnny on the spot. Some CD programs offer no penalty for withdrawing, by the way...or contain the penalty somehow.

 

[partgypsy]

yes high yeild or I''m used to calling them money market accounts. GMAC has 5.3%.

 

[MichelleCarmen]

Date: 9/18/2007 11:54:34 PM
Author: Miranda
You''ve been given great advice. I''d go with a big bank right now. B of A, ING, Countrywide Bank, etc.

Just as a quick mention, there was a Countrywide bank ad in my local paper advertising 6 month CDs at 5.5%.

 

[robbie3982]

Thanks for the advice everyone! I think we''re going to go with a high yield savings account. Now we just have to pick one