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It’s easy to get intimidated when trying to buy a house during this hot housing market. You may have saved for the down payment and were ready to buy — only to lose out in a bidding war or have trouble finding the right home at the right price. If you decide to hold off on buying a house for a while, what do you do with your down payment while you wait?
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Here’s how you can make the most of that money to improve your position when you finally are ready to buy.
Think Carefully About Your Timing
The amount of time you plan to wait before resuming your home search will help you determine the best use of the down payment money. If you want to be able to act quickly when the right house comes along, you’ll invest differently than you would if you signed a year-long rental lease and decide to delay for the longer term. “If it’s a period of less than 12 months, your best bet is to let the funds continue to grow in your current savings account,” said Gerald Grant III, a certified financial planner and Equitable advisor in Washington, D.C. “The most important thing is having the money accessible when you are ready to make the purchase.”
If you think you may want to buy a house in a few months, keep the money in a safe and accessible account you can tap quickly if you find the right house — rather than risking it in the stock market or tying it up in long-term certificates of deposit.
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“Many times, we are so focused on growth that we lose sight of the value of peace of mind and access,” said Grant. “Yes, you can try to invest in a more long-term vehicle, but you run the risk of a potential market downturn at an inopportune time.”
Shop for the best interest rate – you may find slightly higher rates at a credit union or online savings account. With the large size of the down payment, even a small interest rate boost can make a difference. Keep the money separate from your everyday bank account so you aren’t tempted to spend it on other bills.
Build Your Emergency Fund
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