Where to park a large sum of money while we shop for a house?
April 29, 2019 8:00 PM Subscribe
We are selling our house in one of the highest-cost areas of the U.S. The sale will close in the next few weeks. At that time, we will have a very large sum of money on our hands, in the mid-six figure range.
Once our house closes, we will be looking for a new house in another area of the country. We'd like to keep our money liquid, so that we can act quickly if we want to make an offer on a very desirable house. However, there's got to be a better place to park such a large sum of money than a vanilla joint checking account.
Any suggestions on High-yield accounts or other types of accounts that you may know about would be greatly appreciated.
Either high yield savings accounts or 3 month CDs. Both will be somewhere between 2% and 3% yearly, or about $1000 per month in interest.
One caveat - split it into $250K chunks, no more than that at any one bank per person. You want to stay within the FDIC insured limits.
posted by true at 8:13 PM on April 29, 2019 [23 favorites]
One caveat - split it into $250K chunks, no more than that at any one bank per person. You want to stay within the FDIC insured limits.
posted by true at 8:13 PM on April 29, 2019 [23 favorites]
Bankrate is another site for comparing rates at different banks and finding the highest available.
Watch out for accounts that require you to make monthly deposits to maintain the high interest rate.
posted by whatnotever at 8:16 PM on April 29, 2019 [1 favorite]
Watch out for accounts that require you to make monthly deposits to maintain the high interest rate.
posted by whatnotever at 8:16 PM on April 29, 2019 [1 favorite]
Someone who is more of an expert can confirm this but it seems like a money market account would be the answer for this. Usually would be a higher interest rate than a savings account, still FDIC insured, not as liquid as a checking account but still allows plenty enough liquidity for your needs. Although these days it seems that high yield savings accounts offer similar interest rates anyway. Definitely split that $500k into two accounts (since you say "we") to stay within the FDIC insured amount. Sounds like you'll have no issue with staying within any minimum balance on any account (usually something like $10K to get good rates).
posted by belau at 8:37 PM on April 29, 2019 [1 favorite]
posted by belau at 8:37 PM on April 29, 2019 [1 favorite]
Doctor of Credit keeps an active list of savings account opening bonuses, many of which also have fairly decent interest rates on par with what's been stated above. If you split the money into a few new high-yield savings accounts and park it there for a few months, the money you can earn from combined interest and bonuses can be considerable.
posted by eschatfische at 4:57 AM on April 30, 2019 [4 favorites]
posted by eschatfische at 4:57 AM on April 30, 2019 [4 favorites]
Once upon a time (1973), I put the down payment for a house in a checking account in a credit union. After I wrote the check, I got a call from the CR basically asking me to leave the money with them. At that time, savings accounts had terms that, taken literally, meant you had to ask for the money 30 days before withdrawal, though that was never enforced.
So, times have changed, but I'd advise checking that, whatever the account or vehicle you use, that the funds are as liquid as you need them to be.
posted by SemiSalt at 5:53 AM on April 30, 2019 [1 favorite]
So, times have changed, but I'd advise checking that, whatever the account or vehicle you use, that the funds are as liquid as you need them to be.
posted by SemiSalt at 5:53 AM on April 30, 2019 [1 favorite]
No bank is going to stop you from withdrawing your money.
Your only answer is to look for the highest rate money market out there - its usually Goldman/Marcus or CIT of the internet savvy banks, but usually you can get a few more bps if you are willing to use someone with a less pretty interface. I wouldn't over think this.
posted by JPD at 6:19 AM on April 30, 2019
Your only answer is to look for the highest rate money market out there - its usually Goldman/Marcus or CIT of the internet savvy banks, but usually you can get a few more bps if you are willing to use someone with a less pretty interface. I wouldn't over think this.
posted by JPD at 6:19 AM on April 30, 2019
Credit unions have much loser regulation than "real" banks, so I'd be cautious about handing $500k to them.
Credit unions are regulated by the NCUA and are quite strictly regulated. They are not going to, like, lose your money because they are some fly-by-night operation. Deposits with CUs are also federally insured up to $250k per CU, just like bank deposits.
posted by aka burlap at 6:59 AM on April 30, 2019 [8 favorites]
Credit unions are regulated by the NCUA and are quite strictly regulated. They are not going to, like, lose your money because they are some fly-by-night operation. Deposits with CUs are also federally insured up to $250k per CU, just like bank deposits.
posted by aka burlap at 6:59 AM on April 30, 2019 [8 favorites]
Citibank limits the quantity and frequency of money that you can move to the point where I'd strongly recommend against using them for this project.
In theory there is a limit on how many transactions in a time period you can do in your savings account (its for regulatory reasons, not because a bank is trying to limit your options) In practice at most it takes a visit to a branch, and usually not even that.
This is because of how the regulator views deposit funding and the amount of deposits that can be invested in loans vs securities.
But for one time moves of even a few moves a month between a Savings account and another account its not an issue, and even if you are above the limit banks will permit special dispensations. So in practice this is never an issue unless you are doing something crazy.
In theory any account anywhere that isn't a current/checking account has limits on it.
posted by JPD at 7:19 AM on April 30, 2019 [3 favorites]
In theory there is a limit on how many transactions in a time period you can do in your savings account (its for regulatory reasons, not because a bank is trying to limit your options) In practice at most it takes a visit to a branch, and usually not even that.
This is because of how the regulator views deposit funding and the amount of deposits that can be invested in loans vs securities.
But for one time moves of even a few moves a month between a Savings account and another account its not an issue, and even if you are above the limit banks will permit special dispensations. So in practice this is never an issue unless you are doing something crazy.
In theory any account anywhere that isn't a current/checking account has limits on it.
posted by JPD at 7:19 AM on April 30, 2019 [3 favorites]
Great advice above, but adding: make sure that the bank you deposit your money in has physical branches in the area you are looking to buy a house in. Sometimes you have to physically go there to obtain a bank check depending on your jurisdiction, for either earnest money or for the title company.
posted by juniperesque at 7:35 AM on April 30, 2019 [4 favorites]
posted by juniperesque at 7:35 AM on April 30, 2019 [4 favorites]
Yes, savings accounts have transaction limits, disclosed in the paperwork you get when you open one. (The banks I've used were very clear that you get four withdrawals per month and anything more is at their pleasure)
Checking accounts are not savings accounts. There is a reason why they are treated differently, even if you do get checks for your savings account, as some banks allow.
posted by wierdo at 9:34 AM on April 30, 2019
Checking accounts are not savings accounts. There is a reason why they are treated differently, even if you do get checks for your savings account, as some banks allow.
posted by wierdo at 9:34 AM on April 30, 2019
I was just thinking yesterday that I have too much cash sitting in my CU savings at .1%. Just opened an account that will give me 2.1%. Nice timing!
posted by COD at 10:54 AM on April 30, 2019 [1 favorite]
posted by COD at 10:54 AM on April 30, 2019 [1 favorite]
The transaction limits that people are talking about are called Regulation D and apply to all banks. They apply only to money market and savings accounts, not checking accounts. The rules apply only to withdrawals, not deposits, and limit them to six per month. And the limits only apply to online, phone and other types of automated transfers. If you go to a bank teller in person to make the transfer, it is not subject to the limits.
These are not particularly onerous limitations unless you are trying to use your savings account as a checking account, which is exactly the point of the rules. The rules are designed to encourage you to transfer large, infrequent sums from savings to checking and then make lots of smaller payments from the checking account.
The reasoning behind Regulation D goes back to 1933 to prevent a run on the bank and bank failure. Banks are required to have a certain amount of reserves on hand to handle the frequency of checking withdrawals. Banks are not required to have reserves on hand for savings and money market accounts because Regulation D makes it much more difficult to make a run on the bank.
By law, savings and money market accounts are required to tell you that they reserve the right that may require up to seven days notice for withdrawals. In practice this requirement never occurs. It's not something you need to worry about unless you are transferring huge amounts at a really small bank.
If you are worried about it, simply transfer the money from your savings to your checking account at least seven days before you need it. Once it is in your checking account, you can do anything you want with it at any time.
posted by JackFlash at 11:44 AM on April 30, 2019 [7 favorites]
These are not particularly onerous limitations unless you are trying to use your savings account as a checking account, which is exactly the point of the rules. The rules are designed to encourage you to transfer large, infrequent sums from savings to checking and then make lots of smaller payments from the checking account.
The reasoning behind Regulation D goes back to 1933 to prevent a run on the bank and bank failure. Banks are required to have a certain amount of reserves on hand to handle the frequency of checking withdrawals. Banks are not required to have reserves on hand for savings and money market accounts because Regulation D makes it much more difficult to make a run on the bank.
By law, savings and money market accounts are required to tell you that they reserve the right that may require up to seven days notice for withdrawals. In practice this requirement never occurs. It's not something you need to worry about unless you are transferring huge amounts at a really small bank.
If you are worried about it, simply transfer the money from your savings to your checking account at least seven days before you need it. Once it is in your checking account, you can do anything you want with it at any time.
posted by JackFlash at 11:44 AM on April 30, 2019 [7 favorites]
I'd put it in a Vanguard account invested entirely in VMMXX, the Prime Money Market fund. It's currently yielding 2.44%. If you're feeling exceptionally conservative you could put it into VMFXX instead, which yields 0.08% less but is entirely federal government debt and so is a bit safer. I'd call to set up the account and be explicit about your plan to park the money for a few months, just to be sure there's no question about one quick withdrawal when the time comes.
posted by Nelson at 12:04 PM on April 30, 2019 [4 favorites]
posted by Nelson at 12:04 PM on April 30, 2019 [4 favorites]
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