You cannot afford to make the wrong choices by these important resources.
When you buy a home, most Mortgage lender You need to pay at least one deposit. And ideally, you will be reducing the value of your home by 20% to avoid private mortgage insurance and qualify for a loan at the best interest rate.
Since a house is an expensive purchase, a small one too deposit can add up to tens of thousands of dollars. It will likely take time to save enough money to cover it. And when you save it, you have to decide where to put the money. This decision is important because you want to avoid making the wrong choice and putting your ability to buy a home at risk.
Where should you put your down payment savings?
While you have several options for how to handle your down payment, in almost all situations, putting the money in a high-yield savings account is your best bet.
ON High yield savings account offers the perfect solution, as your money is in a separate account reserved for your deposit. That means you are less likely to rob the funds. You deserve a better price than one checking account or most traditional savings accounts and you can take the money out when you need it.
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There are a few main reasons this is your best option.
First and foremost, within months or years, you will likely capitalize on the down payment savings to buy a home. No matter how long you hold onto the money, you cannot afford to invest in the stock market for such a short period of time because you may buy at the wrong time and experience a market crash that will deplete the value of your funds.
While restores are inevitably the result of crashes, it can take some time and you may not want to postpone your home purchase while waiting to get back the money lost in the market. By tying up your money in investments, you are taking the chance in not being able to access it when you are ready become a homebuyer. Why should you jeopardize your home ownership dreams?
Other investments where you need to freeze your money for a certain period of time, e.g. B. Bonds or Certificates of depositmay also not be the best choice as you may need your money on a shorter timeline. When the perfect opportunity for a home arises, you don’t want to be prevented from giving it away while you wait for your loan to mature or imposing an early withdrawal penalty.
You also don’t want your deposit in your regular checking account to be mixed up with your other funds. Doing this increases the chances of spending it on other immediate priorities rather than leaving it alone until you find the perfect home. It may take you longer to become a homeowner when you spend your down payment because it is too accessible to you.
Take the time to research savings account options to find the one for you, and put your money back on a regular basis so you can build the down payment you need to buy the home of your dreams.