I'm currently exploring options for saving a large downpayment for a future home purchase and would appreciate any advice or insights you might have. Here’s a brief overview of my current situation:
Background: Just graduated and started a high-paying job. I live with my parents in a high-cost-of-living (HCOL) area where they have relatively low rent. I can stay with them for the next 3-5 years rent-free. My goal is to save aggressively, help ensure my parents' financial stability, and plan for early retirement.
Financial Details:
- Income: Can save about $60k/year excluding 401k and IRA contributions. Combined family income will be around $350-400k/year by the time we buy a house.
- Savings Goal: Aiming for a $1 million home (+/- $200k), with a $500k downpayment.
- Current Savings Rate: Based on conservative estimates, I’ll have $200-300k in liquid savings in 3-5 years.
Questions:
- Investment Allocation: Considering the short-term goal (3-5 years), the stock market presents a higher risk but higher potential return (approx. 10% AAR). High-Yield Savings Accounts (HYSAs) offer a safer, albeit lower, return at around 4.2% AAR. Is a 50/50 split between the stock market and HYSAs a sensible approach?
- Downpayment Strategy: I’m considering making a 50% downpayment to minimize interest payments on a 30-year mortgage, though I plan to pay the mortgage off ASAP to reduce interest. Is this approach realistic and financially optimal?
I appreciate any insights or experiences you can share, especially regarding how best to balance potential returns with risk given my financial goals and timeline.
Thank you!
original posted by Orcanius to r/personalfinance on Thu, 18 Apr 2024 15:50:05 GMT.