Have you been saving up for a home down payment on your home for a while now? Inflation in 2022 is expected to hit around 10% in 2022! That’s crazy; as if home values weren’t high enough already. If you’re like a lot of homebuyers, you might opt to wait anywhere from 6-24 months to better gauge risk, re-evaluate time horizons and wait for inflation to come back down. This is not financial advice, but here are a few options for you to consider if you find yourself adjusting your home buying horizon. The time frame is more important than the yield. The shorter the time frame the more easily accessible the cash needs to be.
0-6 Months
If you’re a homebuyer who intends to buy a house as soon as next week or as far out as six months you will want to keep your down payment readily available. You’re most likely in this timeframe because you are simply waiting for the right house to hit the market. Inflation, yields and risk are not likely concerns of yours. It’s advised you keep your money as liquid as possible by keeping it in a savings account. Keep your home down payment in an account separate from that of the account that you pay bills out of to prevent money from your down payment going towards anything other than that.
6-12 Months
Around this timeframe, you’re starting to commit to a long-term search. You’re still waiting for the right house to hit the market, but at the right price. Inflation might be of concern but not of utmost importance. If you’re at the 6 month mark and plan to wait until 12 months to begin your search you may want to consider investing 25% and saving the other 75%.
12-18 Months
If you’re waiting 12-18 months to find a home, inflation is a bit of a concern. Home buyers who find themselves in this time period may consider putting a chunk of their down payment into the market. When you hit the 12 month mark you may have 25% invested and 75% saved, if you wish to wait until 18 months to see how volatility, mortgage rates and home prices vary you may consider investing another 25%. Now your balance is 25% invested and 25% saved. When you get to 18 months you can withdraw the 50% invested.
18-24 Months
At this point, waiting 24 months is a long-term commitment to waiting for more market certainty. Based on the previous math, if the two year plan sounds right for you, consider investing 100% of your home down payment. Find a low volatility market fund that most likely won’t reduce your down payment.
Protecting Your Utah Home Down Payment
This method is one strategy that finds a middle ground between those who can’t tolerate the effects of inflation but want to avoid losing a large sum of their home down payment. Figure out your risk tolerance and you can decide investing percentages on your own. If you want to take a more aggressive strategy, be advised that you shouldn’t invest large sums of money for a 6 month timeframe as you can face complications with taxes when you pull out of the market. Please do your own research and find a strategy that works best for you. This isn’t financial advice, it’s to give you an idea of your options depending on your home buying timeline. When you’re ready to buy, contact us today!
