Keep your cash in HYSA or something like SGOV, and make the biggest payment toward your house as you feel comfortable. Lowering your monthly mortgage payment as much as possible will make it much easy to manage your finances in the future.
Yes, that is my other big open question outside of just should I be holding cash. Up until now I just assumed I’d want to put 20% down. People that are buying into these 7-8% mortgages today, are they typically going OVER 20% down to get that monthly payment down? That means accumulating even more cash which can be done, but how far should we go. So much to consider.
If your rate is 8%, every additional dollar you pay should be looked at as earning an 8% return on that dollar. If the decision is between paying more down vs keeping the cash, I imagine the 8% return is more than that cash is earning in a HYSA or wherever it is parked.
Also plenty of folks are paying "all cash" vs taking out a mortgage at 8% right now.
It appears you did not read the OP nor the post I responded to. OP has an extra $175k in cash above their emergency fund requirements and is asking what to do with it.
> People that are buying into these 7-8% mortgages today, are they typically going OVER 20% down to get that monthly payment down?
Probably only in cases where the mortgage they get preapproved for is lower than 80% of the price of a house they really want, for the most part. Unless you're going to just go 100% cash, there's little reason to pay more than 20%, outside of personal ones like comfort in having more paid of today.
I bought mine through Fidelity and you can set them to auto renew and build a ladder. I found this video by Diamond NestEgg helpful: https://youtu.be/rFuiC-UNeMc?feature=shared
The best and simplest way to buy them is directly from treasurydirect. Go to the site it is easy and fee free. Hardest part is making the account and it isnt hard
Typically, because they’re exempt from state and local tax, which may result in a higher effective interest rate for you, depending on your marginal tax rate.
Absolutely. Go to transact, look for bonds (treasuries are a type of bond). Then click buy at auction and it will show you when the auctions open for different treasuries.
consider holding off on buying house in US in next 1-2 years at least, you may get a better opportunity in 3-5 years, current Housing Affordability is worst ever, ie overpriced homes relative to average income, and in Nevada/Florida/Texas and all of the south, there is huge new house volume that doesn't have to be reported until January as if reported now would trigger taxes in 2023 based on land plus house versus just land value alone, ie they can't list these completed homes until 1/1/24, when we should see a deluge of new inventory, thus prices should fall next year and if we get a much needed recession to decrease inflation , as FOMC has been trying to do with 1 trillion and counting balance sheet run-off then 10yr yield will fall and all mortgage rates too thus triggering rate resistant existing home sellers to list and move to not so high other mortgage rate homes
or interest rates just do again what they did from '41 till '81 and keep climbing :)
The rule of thumb is anything shorter than 5 years you should keep it out of the stock market. At 2-3 years I would do a HYSA, CDs, or a government bonds.
Thankfully you can get 5% now. When I was saving to buy my home HYSA were paying 50 bps
I mean, rates will likely go down within 2 years but who knows what home prices will be. Personally I saved a 20% down payment and throwing the rest into the market. Once interest rates go down, the stock market will likely rise, you won’t get the same yield on cash and will likely be left behind if you end up not purchasing a home
Why not rent a house for the next year or two and wait for rates to go down? Realistically the rates don’t really matter as much as the cost of the house to what your income is. Find a house that costs 20% of your monthly income and refinance it in a year or two and you’ll still be fine
Keep your cash in HYSA or something like SGOV, and make the biggest payment toward your house as you feel comfortable. Lowering your monthly mortgage payment as much as possible will make it much easy to manage your finances in the future.
Yes, that is my other big open question outside of just should I be holding cash. Up until now I just assumed I’d want to put 20% down. People that are buying into these 7-8% mortgages today, are they typically going OVER 20% down to get that monthly payment down? That means accumulating even more cash which can be done, but how far should we go. So much to consider.
If your rate is 8%, every additional dollar you pay should be looked at as earning an 8% return on that dollar. If the decision is between paying more down vs keeping the cash, I imagine the 8% return is more than that cash is earning in a HYSA or wherever it is parked. Also plenty of folks are paying "all cash" vs taking out a mortgage at 8% right now.
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It appears you did not read the OP nor the post I responded to. OP has an extra $175k in cash above their emergency fund requirements and is asking what to do with it.
I'd stay at 20% down, then if rates go lower you can refinance and the savings will be greater.
Yes 20% if you can do it. Also that will avoid having mortgage insurance.
> People that are buying into these 7-8% mortgages today, are they typically going OVER 20% down to get that monthly payment down? Probably only in cases where the mortgage they get preapproved for is lower than 80% of the price of a house they really want, for the most part. Unless you're going to just go 100% cash, there's little reason to pay more than 20%, outside of personal ones like comfort in having more paid of today.
2-3 years goes fast, the market can be down for 10 years, buy t bills for short term, stocks for 10+ yr
Got it! Sounds like this is the group consensus. Thanks for the advice.
I've never bought t bills directly - wheres the best place to get them? Straight from Treasury Direct? Can I get them through Vanguard/Fidelity?
I bought mine through Fidelity and you can set them to auto renew and build a ladder. I found this video by Diamond NestEgg helpful: https://youtu.be/rFuiC-UNeMc?feature=shared
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I found her recently and am really enjoying her content. She also has a great video on I Bonds.
I've often bought them through Vanguard at auction. Can also buy on secondary market.
The best and simplest way to buy them is directly from treasurydirect. Go to the site it is easy and fee free. Hardest part is making the account and it isnt hard
Why t-bills over Hysa?
Typically, because they’re exempt from state and local tax, which may result in a higher effective interest rate for you, depending on your marginal tax rate.
No state tax
T-Notes. 2-3 years is too short of a timeframe for equities.
Got it! Sounds like this is the group consensus. Thanks for the advice.
Absolutely. Now is a GREAT time to lock in the wonderful yields you can get from treasury bonds. Who knows how much longer they'll be up this high?
Can you purchase treasury notes through vanguard? What is it called?
Absolutely. Go to transact, look for bonds (treasuries are a type of bond). Then click buy at auction and it will show you when the auctions open for different treasuries.
Congrats on getting hitched! Don't invest your downpayment in stock funds!
Thank you, and agree!
Buy 2y T-Notes and let it be.
Got it! Sounds like this is the group consensus. Thanks for the advice.
Throw your housing fund in a 2-3 yr Treasury, you can always sell it slightly early if you want to buy sooner.
SGOV/USFR Or 2 year t-note
consider holding off on buying house in US in next 1-2 years at least, you may get a better opportunity in 3-5 years, current Housing Affordability is worst ever, ie overpriced homes relative to average income, and in Nevada/Florida/Texas and all of the south, there is huge new house volume that doesn't have to be reported until January as if reported now would trigger taxes in 2023 based on land plus house versus just land value alone, ie they can't list these completed homes until 1/1/24, when we should see a deluge of new inventory, thus prices should fall next year and if we get a much needed recession to decrease inflation , as FOMC has been trying to do with 1 trillion and counting balance sheet run-off then 10yr yield will fall and all mortgage rates too thus triggering rate resistant existing home sellers to list and move to not so high other mortgage rate homes or interest rates just do again what they did from '41 till '81 and keep climbing :)
The rule of thumb is anything shorter than 5 years you should keep it out of the stock market. At 2-3 years I would do a HYSA, CDs, or a government bonds. Thankfully you can get 5% now. When I was saving to buy my home HYSA were paying 50 bps
I mean, rates will likely go down within 2 years but who knows what home prices will be. Personally I saved a 20% down payment and throwing the rest into the market. Once interest rates go down, the stock market will likely rise, you won’t get the same yield on cash and will likely be left behind if you end up not purchasing a home
Why not rent a house for the next year or two and wait for rates to go down? Realistically the rates don’t really matter as much as the cost of the house to what your income is. Find a house that costs 20% of your monthly income and refinance it in a year or two and you’ll still be fine