Another house down payment question

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  • Avatar jstamsch 
    Status: Resident, Physician
    Posts: 2
    Joined: 02/24/2016

    I’ve read through the forum and seen lots of threads regarding where to stash money for a down payment for a house, but most seem to be rather short term. I’m not looking at purchasing a house for at least 5 years, after PSLF hopefully takes care of my student loans.  Does it make no sense to put the down payment money in Vanguard Total Bond Market or Vanguard’s Target Retirement? I know that the common suggestion is taking 2.5% from a savings account, but the money isn’t needed in the next year. TIA for your suggestions!

    #247977 Reply
    ACN ACN 
    Status: Physician
    Posts: 666
    Joined: 01/08/2016

    If you’re using the money within 5 years, high yield savings.

    If you're ever having a bad day, just remember in 1976 Ronald Wayne sold his 10% stake in Apple for $2,300.

    #247979 Reply
    Dreamgiver Dreamgiver 
    Status: Physician
    Posts: 893
    Joined: 03/09/2017

    You won’t get direct answers because your timeline falls in a grey area. If it were me, >5 yrs I’d do equities in the form of a total stock market fund. But I got no other debt and can cashflow if the market tanked right before I needed the money. Not sure a target retirement fund would be the best option, especially for tax implications, but I guess, if you choose the appropriate target date, might limit a possible downturn.

    #247986 Reply
    Liked by jfoxcpacfp
    Faithful Steward Faithful Steward 
    Status: Financial Advisor, Small Business Owner
    Posts: 519
    Joined: 06/12/2017

    If your time frame is approximately 5 years, I’d use a high-yield savings, Vanguard MM, or on the more aggressive side (for such a short timeframe) Vanguard Wellesley Income Fund.

    Michael Peterson, CFP® | Faithful Steward Wealth Advisors | (717) 496-0900

    #247997 Reply
    Avatar DCdoc 
    Status: Physician
    Posts: 597
    Joined: 06/14/2016

    Can you invest all the money now and then (re) save for the down payment in the next couple years?

    #248005 Reply
    Liked by Lordosis
    Lordosis Lordosis 
    Status: Physician
    Posts: 2129
    Joined: 02/11/2019

    How much are you saving?
    Say 100k.
    1666 monthly for 5 years.
    Best case you get 10% returns. That is 30k in gains. But wait you have to pay taxes on those gains! So knock off 20%. You also would have make 5k at 2% in a mmf. So even under the best circumstances you are only going to be ahead 20k.
    More likely you will have lower gains or possibly negative. If is just not worth the risk when you need to obtain a particular dollar amount at a particular time.

    “Never let your sense of morals prevent you from doing what is right.”

    #248011 Reply
    Liked by CordMcNally
    CordMcNally CordMcNally 
    Status: Physician
    Posts: 3017
    Joined: 01/03/2017

    Depends how much money we’re talking about and how much you think you’ll be able to save in the near future. Unless it’s an incredibly large sum or you’re in a low paying specialty, you may just be able to cash flow it once you get a little closer to when you may buy.

    “But investing isn’t about beating others at their game. It’s about controlling yourself at your own game.”
    ― Benjamin Graham, The Intelligent Investor

    #248020 Reply
    Liked by DCdoc
    Avatar Peds 
    Status: Physician
    Posts: 4646
    Joined: 01/08/2016

    Yes taxable. No none of those options you picked.

    #248041 Reply
    jfoxcpacfp jfoxcpacfp 
    Status: Financial Advisor, Accountant, Small Business Owner
    Posts: 8330
    Joined: 01/09/2016

    If you don’t need the $$ for “at least” 5 years, that tells me you’re flexible. In that case, I’d put it in an appropriately diversified equity fund portfolio that you are prepared to liquidate if the market is up when you want to buy or keep invested until the market recovers. If you have a hard buy date of 5 years, my answer would change somewhat.

    btw, I wouldn’t leave 100% of the funds invested for the full 5 yrs if you really hope to buy then. I’d gradually liquidate until the purchase date. I realize this is not definitive but, in this situation, I cannot be precise without having some pretty exhaustive conversations and running projections. However, I hope this helps get you at least part of the way toward making a decision.

    And I’m really not a fan of TBM or TDFs but I’m in the minority, so take that opinion with a grain of NaCl.

    Johanna Fox Turner, CPA, CFP: I am not your financial advisor; any responses are for general purposes only ~ [email protected]

    #248047 Reply

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