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What should I do with my home equity while we rent?

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  • What should I do with my home equity while we rent?

    Partner and I are moving out of state for his first post-residency job this summer - I have about $150,000 in equity in my current home, which I will be selling and have owned since before I met him.  We have gone back and forth over rent vs buy, changing our minds almost daily.  One question I have is, if we rent for 1-2 years to make sure we like the new area and his new job, what do I do with my equity cash during that time?  Stick it in my regular old savings account at the bank?  A CD might pay more interest (barely) but I don't like that it would be locked up and unavailable for us to buy a house on short notice if the right opportunity came along.  Others have suggested I put it in retirement accounts or pay down his student loans immediately and then start saving a new amount for the house down payment or do a physician loan with less than 20% down?

  • #2
    Lots of questions.  Is the relationship stable?  How big are the loans?  What are your ages? I might sell the house first and then work with number you actually have after the sale and all fees are paid. I think renting for a year or two makes a lot of sense.  The decision on the cash depends on the answers to the questions.

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    • #3
      I'd do some combination of high interest savings account (Ally) and towards student loans (though you didn't say what the rate was).  Remember, it doesn't have to be 100% towards one thing.  First priority will be high interest debt if you have any.  Then, I'd conservatively figure out how much is needed for a 20% downpayment, throw that money into the Ally account, and then put the rest towards maxing out retirement accounts, then towards student loans.

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      • #4




        Partner and I are moving out of state for his first post-residency job this summer – I have about $150,000 in equity in my current home, which I will be selling and have owned since before I met him.  We have gone back and forth over rent vs buy, changing our minds almost daily.  One question I have is, if we rent for 1-2 years to make sure we like the new area and his new job, what do I do with my equity cash during that time?  Stick it in my regular old savings account at the bank?  A CD might pay more interest (barely) but I don’t like that it would be locked up and unavailable for us to buy a house on short notice if the right opportunity came along.  Others have suggested I put it in retirement accounts or pay down his student loans immediately and then start saving a new amount for the house down payment or do a physician loan with less than 20% down?
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        In the short term (< 5 years) safety and liquidity are far higher priorities than earnings. Yes, I realize it is difficult to watch money sit and not "work" for you, but the risk of loss is far too great. I would have recommended a high quality corporate bond if you had a fixed date for your goal, but that is not part of your plan at this point. A guaranteed return on student loan debt, however, is sure to be better than a 1% return on savings (probably less). Probably best in this situation to be patient and let your savings dictate the timeline for purchase. You'll come out better overall in the long run.
        Working to protect good doctors from bad advisors. Fox & Co CPAs, Fox & Co Wealth Mgmt. 270-247-6087

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