Here’s why using a savings account for a down payment on a house is a smart money move

Here’s why using a savings account for a down payment on a house is a smart money move

One of the most challenging parts of buying a home is saving money for a down payment. Typically, home buyers need to put down at least 20% of the selling price. For example, if the home’s price is listed at $200,000, the down payment should be around $40,000, which is equivalent to 7.5 months of income for the average home buyer. Though a mortgage will cover the majority of the home’s purchase price, the down payment is not covered by the bank.

A house down payment is a substantial amount, which is why it’s wise to begin saving money for your home purchase as soon as possible. Placing money aside in a traditional savings account is a good start, but to maximize your savings and earn as much as possible, you should consider other savings options. High-yield savings accounts, certificates of deposit, money market accounts, and cash back credit cards are just a few of the ways you can boost your savings potential.

When it comes to saving money for a house down payment on a house, every penny counts. If you don’t want to leave money on the table, you can maximize your earnings with these high-yield savings options on the Credible marketplace.

Why you should consider a high-yield savings account

Most individuals planning to purchase a home will start building their down payment in a traditional savings account. Unfortunately, this type of savings account does not offer a high annual percentage yield (APY) rate to help maximize earning opportunities. A high-yield savings option, however, can offer account holders a substantially higher interest rate — sometimes more than double the standard savings account rate.

Another benefit of a high-yield savings account is that most are offered fee-free, which means you won’t be charged unnecessary expenses just to save for a down payment. These accounts are also FDIC insured up to $250,000. A high-yield savings account also limits the number of withdrawals you can make, helping you resist the temptation to use your house down payment savings for another expense. Though these accounts have variable interest rates which could drop after your deposit, the rates are still typically higher than traditional savings account APY rates.

If you’re interested in increasing your personal capital and reaching your savings goals quicker, you can visit Credible to find a high-yield savings option that best fits your goals. ReadMore

Source : foxbusiness