I need some banking advice...

[jml06fsu]

Some background info first...

I graduated from college a year ago, and I now work for a company that I want to stick with long-term. My boyfriend and I have been renting together for 2+ years and we intend to get married eventually, but we can't stand the amount of money we throw away each year as renters. We want to buy a house this year. I keep telling him "I don't want a ring, I want a house!" We found out that our tax returns are much larger than we originally expected, and aside from that, we save a significant amount of money each month and have enough for a down payment. We won't start house hunting for a few more months because we just moved to a new city and signed a new lease. What we pay for a 1br/1bath could easily pay a mortgage!

So we want to open a savings account. I have one through Wells Fargo right now and he has one at BoA, but I know some banks offer better interest rates than others. Would it be best to open an online savings account through Ally, for example? I know they offer higher APY (if that's even the correct term?) Or would it be better to keep our money in the accounts we have now. Is it worth it to have money in a savings account for less than a year? Is there any advice anyone can give us on where to stash our savings?

 

[olecow]

If it's money you'll need within the next few years I would keep it in a savings account. We have a few online savings accounts with Capital One 360 (formerly ING Direct). Each account is for a different purpose (emergencies, vacations, etc.). They're easy to set up and link to a checking account, and they pay more than you'll find at most brick and mortar banks or credit unions. However they may not pay enough for you to switch from your Wells Fargo or BofA accounts. For example, we earn .75% on our accounts at Capital One and a savings account at our bank is paying anywhere from .01 to .25. We're earning more with an online account but not enough to get too excited about. You'll have to decide that for yourself, but I would definitely put house savings money in a savings account.

 

[Minnie Momma]

Ready Access CDs are another option. Generally you can earn more interest in a CD and the Ready Access have shorter terms. Ask a teller at your bank for the best short term solution. We are there to help!

 

[Marionnette]

Some background info first...

I graduated from college a year ago, and I now work for a company that I want to stick with long-term. My boyfriend and I have been renting together for 2+ years and we intend to get married eventually, but we can't stand the amount of money we throw away each year as renters. We want to buy a house this year. I keep telling him "I don't want a ring, I want a house!" We found out that our tax returns are much larger than we originally expected, and aside from that, we save a significant amount of money each month and have enough for a down payment. We won't start house hunting for a few more months because we just moved to a new city and signed a new lease. What we pay for a 1br/1bath could easily pay a mortgage!

So we want to open a savings account. I have one through Wells Fargo right now and he has one at BoA, but I know some banks offer better interest rates than others. Would it be best to open an online savings account through Ally, for example? I know they offer higher APY (if that's even the correct term?) Or would it be better to keep our money in the accounts we have now. Is it worth it to have money in a savings account for less than a year? Is there any advice anyone can give us on where to stash our savings?

Savings account APYs are so pitiful right now that it doesn't pay to move your money into a new account for just one year. And anything that is going to have a potential for a higher yield is also going to carry a higher risk. You don't want to do that with money you need within a year.

 

[robsmom]

I know this is not exactly what you were looking for, but I wanted to add that the best type of bank account is your own. I know that you are young and in love and I hope that everything works out perfect for you. That said, you don't have any of the legal protections of marriage. Keep your money in your own name in your own account until you are married. Not a huge fan of buying the house before marriage either, but understand the economics of why you want to do it. Once you buy the house your name will be on the title (and mortgage!) and you can set up clear ownership of your share.

 

[seashoreCM]

The fact you are not married right now suggests that you have not made up your mind about that -- in which case it is not a good idea to get a mortgage loan that needs both of your signatures.

 

[GrnMtnMan]

we can't stand the amount of money we throw away each year as renters.

As someone who works in the greater mortgage industry, I want to point something out about this old cliché: unless you have the money to buy you housing with cash, you are renting.

When you outright rent a property, you pay the owner for the use of that property.

When you 'buy' a property with a mortgage, you buy 20% of that property and rent the other 80% with your mortgage payment. Yes, each month you be buy a little more of of the house as you pay down the principle, but most of that payment is going to 'rent' the money you borrowed (also known as interest).

There are major upsides to renting: landlords replace broken appliances, fix roofs, pay for storm damage. Should you job or life situation change, you can simply stop renting and you are done with it...its even pretty easy to break a lease if you are in one. Same things happens when you 'own' a home, and you could face financial ruin.

Plus there are major expense when you buy and sell homes...title insurance, local transfer taxes, real estate commissions....the bottom line is that buying a home is a decision that should be made rationally, after considering your finances and future life plans.....not based an only-sometimes-true cliché.

 

[StitchesGr8Fan]

I recommend sharing your credit reports with each other before you do anything. That way you can tell if it is safer to keep separate accounts and put the mortgage in one name, or if it is safe to join accounts. The reason I say this is because if anything crops up and you have joint accounts both of your assets are at risk.

It is a little concerning that you are out of school and have been together that long and aren't planning on marriage yet, but are buying a house. If anything does go wrong you are going to have a heck of a mess on your hands.

 

[brucerob62]

not to be the moral police but..dont ever buy a house and get a bank account with someone you are not married too, keep everything seperate, if it dont work you will be happy you did.

 

[clintswifeymomof4]

OP asked for banking advice... Not advice on her relationship or living situation.

I use Capital One 360 as well (formerly ING DIRECT). I see it as 0.75% is better than 0.01% no matter what your balance.

 

[GrnMtnMan]

OP asked for banking advice... Not advice on her relationship or living situation.

So if you saw a train wreck about to happen, you'd only comment about the rusty paint job on the box cars?

 

[ssawka]

I recommend seeing if you are eligible to join any credit unions. Some are better than others, but in general, the fees you pay to a credit union are much lower (if there are any fees at all.)

 

[brucerob62]

OP asked for banking advice... Not advice on her relationship or living situation.

I use Capital One 360 as well (formerly ING DIRECT). I see it as 0.75% is better than 0.01% no matter what your balance.

this is living advice and financial advice ..all wrapped up together...keep savings SEPERATE!! in a CD if possible and then when you get married lump money together and have a nice house

 

[RitaE]

I think what people are asking is -- when you say you want a house, not a ring -- are you saying you just don't want to spend big money on a wedding, or are you saying that you just aren't at the point yet where you consider your relationship committed for life, or at least committed for the length of owning that house?

I'll leave the moral judgement out but I think that if you are going to buy a house with somebody, you need to have an exit strategy should one be needed.

Bank accounts are actually pretty easy to dissolve, houses and mortgages not so much.

Would it be possible for YOU to buy a house in your name only and then charge rent to your boyfriend to help pay the expenses?

 

[Colleen27]

I wouldn't bother with a new account for such a short period of time.

I understand leaps of faith - I bought a house with DH before we were married AND left my job to be a SAHM to my oldest (who isn't DH's biological child). But I would strongly recommend going in with your eyes open - pull and share free credit reports, save separately and bring funds from both of you to closing, take the time to have a lot of conversations about what direction you are looking to go in life, and then jump in if everything looks good.

 

[jml06fsu]

Thank you all for your advice! I really do appreciate it...even the warnings. Although I do think "train wreck" may be a little over the top, I do understand the concern that this isn't the best idea for two unmarried people.

Also to clear things up a little, we would get married today...there's no commitment issue. It is unconventional, but this is the order in which we want things to go. I personally feel bad for my friends who spent all this money on a wedding (their parents $$ too) and now the idea of home ownership is put aside because they're broke. The idea of putting the house in one of our names and paying the mortgage together does sound like a safer idea though. Btw our parents fully support it.

So I guess I should have just asked:
I want to buy a house this year (in 7-10 months) where is the best place to put my savings?

Thanks again folks!

 

[GrnMtnMan]

Thank you all for your advice! I really do appreciate it...even the warnings. Although I do think "train wreck" may be a little over the top, I do understand the concern that this isn't the best idea for two unmarried people.

Also to clear things up a little, we would get married today...there's no commitment issue. It is unconventional, but this is the order in which we want things to go. I personally feel bad for my friends who spent all this money on a wedding (their parents $$ too) and now the idea of home ownership is put aside because they're broke. The idea of putting the house in one of our names and paying the mortgage together does sound like a safer idea though. Btw our parents fully support it.

So I guess I should have just asked:
I want to buy a house this year (in 7-10 months) where is the best place to put my savings?

Thanks again folks!

I wasn't calling your situation a train wreck...I was trying to make the point that it's hard to ignore the bigger picture when someone asks you about a minor detail. Wife and I actually bought our first place post-engagement and pre-wedding...we started shopping and found the place that was right really quick.

Regarding your question: interest rates are so low, just stick it an savings account. Since you need the money soon, there's no place else that's safe enough.

But please make this decision carefully...should you start a family and need to move up to a larger home sooner than expected, any savings you might realize from owning might be wiped out from home purchase and sale transactions costs, which are significant - they were more than 10% of the sale price of my first home. Then there are all the transaction costs of buying the new home....

 

[ktlm]

Thank you all for your advice! I really do appreciate it...even the warnings. Although I do think "train wreck" may be a little over the top, I do understand the concern that this isn't the best idea for two unmarried people.

Also to clear things up a little, we would get married today...there's no commitment issue. It is unconventional, but this is the order in which we want things to go. I personally feel bad for my friends who spent all this money on a wedding (their parents $$ too) and now the idea of home ownership is put aside because they're broke. The idea of putting the house in one of our names and paying the mortgage together does sound like a safer idea though. Btw our parents fully support it.

So I guess I should have just asked:
I want to buy a house this year (in 7-10 months) where is the best place to put my savings?

Thanks again folks!

I'm not so much worried about the buying the house together. If something happens, it might be a pain, but it can always be sold. Just be sure both of your names are on it. I've seen the situation where two people "bought" the house together, but only one of them wound up on the deed due to financing issues, and when they did wind up splitting before the wedding, it turned into a big legal mess when he started claiming that HE bought the house, and that she was basically just paying rent. I know you think that he would never in a million years do anything like that to you, and he might not, but when someone is angry and has hurt feelings, sometimes things just happen. If you are sinking money into a house, then you be sure your name is on that deed so there is no question that you have an interest in that house!

As far as where to keep your money. If you want to buy a house in 7 to 10 months, I would say just keep it in savings where there is no penalty for withdrawal. I would also say, DO NOT combine your bank accounts before you get married. Keep your separate accounts and just work out how you want to split payments, bills etc. You definitely don't want to combine your accounts before marriage because that can create a total mess if for some reason things don't work out, and can just lead to issues and arguments anyway. There is just no reason you need a combined account. I've been married to DH for almost 18 years, and we have been together for almost 24 years, and we have always maintained our separate bank accounts. I know that might be a little unusual, but we have never once had a fight about money in all those years. He has his account, I have mine, we split up the bills, and no one complains about what the other is spending. It might not be for everyone, but it works great for us.

Best wishes, and I hope you find a house you love and have a long and happy life together.

 

[robsmom]

Also to clear things up a little, we would get married today...there's no commitment issue. It is unconventional, but this is the order in which we want things to go. I personally feel bad for my friends who spent all this money on a wedding (their parents $$ too) and now the idea of home ownership is put aside because they're broke. The idea of putting the house in one of our names and paying the mortgage together does sound like a safer idea though. Btw our parents fully support it.

So I guess I should have just asked:
I want to buy a house this year (in 7-10 months) where is the best place to put my savings?

Thanks again folks! [/QUOTE

I often hear people say that they aren't getting married because they don't have or don't want to waste the money on the wedding. Marriage and big expensive wedding are not synonymous. If you really are ready and want to get married you can do so for very little to no cost. A wedding can come later if you still want to have one. That said, it is ok if you are not ready to get married. Just make sure that you are honest with yourself as to the real reasons. That will help you understand if buying together or in one name makes more sense.

 

[Eastern]

You're not necessarily throwing away your money on rent. As others have said, owning has its own drawbacks. You need to spend time and money on maintenance, tax, utilities, etc.

There is nothing wrong with renting while you are at a very changeable point in your life. You may get married, you may stay with this first job, etc., but if you don't, having to sell a house is a big PIA. It's so much easier to get out of a rental than a house. I've been there.