How to Use the Highest CD Rates to Save for a Home

It may seem as though the idea of owning your own home is a farfetched dream, especially in light of the recent economic turbulence. Despite the struggles of …

It may seem as though the idea of owning your own home is a farfetched dream, especially in light of the recent economic turbulence. Despite the struggles of the economy and the sinking of the housing and real estate market, owning a home can still be an equitable reality if you want it to be.

The best thing to do is to start saving up for the day when you might be able to afford the house you’ve always imagined yourself living in.

So how do you get started on saving for a house, especially in this current market?

Okay, so what can a CD actually do to help you save for a house? First, let’s check out what a CD is – it stands for certificate of deposit and it’s a low risk account that accrues interest on the amount of money that you deposited; you can then set it up for a fixed amount of time. For instance, if you know that you’d like to buy a house within a year or two, you can start putting money into a CD and put the amount of time to a year or two.

The way a CD works is that you deposit a certain amount of money at the time of sign up; for Discover Bank, the minimum amount is that of $2500, with a minimum of three months for the CD to mature. To mature, the money in a CD must stay within the account for the amount of time that you specified. For example, if you put in $2500 and want it to stay there for about a year, in order for the CD to mature, it needs to stay untouched for the entire year.

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This allows for the CD to grow interest, thus giving you more money when you finally take it out at the end of the year.

Alas, this is where the highest CD rates from Discover bank come into play. Their rates consistently exceed the national average, which starts at about .10% for the first three months and then rises slowly to around .70% at the start of ten years. Discover’s CD interest rates start out at .30% for the first three months and then goes to 1.88% at the ten year option.

What that means is for the $2500 that you put in for, let’s say three years, you’d make $84 in interest with Discover versus the $34 that you’d make elsewhere. You might think that $84 isn’t exactly a lot, but it also depends on the amount of money and how long you let the CD mature. For instance, if as a freshman in college you put in $2500 for ten years, you would have made $500 by the time you’d be at the point of considering buying a house.

The first thing you should do when considering buying a house is to see what the market prices are now. This might be a bit difficult, especially when you aren’t sure where you’ll be in two to five years, but it’s still a good idea to check what current prices are in your city and perhaps your state. This can give you a ground basis of how much money you’ll need to put away and save, as well as how long it will take you to get it.

With this in mind, you can then easily decide how much money you need to put in a CD and using the highest CD rates with Discover, you can also decide how long you need to keep it in the account. If you know where you want to live in a few years, this can help too, as you can have a base idea of where you’d like to live and what the housing market is. Keep in mind that there are some homes that you can rent to own as well, though you should always make sure these are on the up and up and you aren’t being swindled.

Renting to own can be good too, especially if you live the quaintness of a town home or condo; these are usually cheaper than owning an actual house, but you still get the neighborhood feeling. This is also great for people who still want something on the small scale of an apartment, but the same assets that you would have if you were actually owning a home.

Certainly the type of home also factors into how much you should save and put away; the smaller the home, the cheaper it may be, especially if it’s only a one bedroom. However, if you’re planning on having a family – if you’re considering it or even discussing it with a significant other – your costs might be a little higher, depending on the size and location of the home.

The most important thing to remember is just to do the research and get all your ducks in a row, as they say. Being prepared for a major financial decision is important; sometimes we are caught off guard at the true expense of just how much we needed to actually save. In terms of buying a house, keep in mind that sometimes you may need to do repairs or bring in new items. There’s nothing wrong with buying a fixer upper, so you have the ability to make your house just the way you want it. Of course, with that comes the financial burden of paying for certain amenities, equipment, and repairs.

Owning your own home is still a major factor in the American dream. Despite the turmoil that is the housing and real estate market, that dream can still be realized; it just needs to be considered carefully and approached with a good financial plan in the minds of buyers. Using a CD can help towards that goal, as you can watch money mature and have an already established amount before you start negotiating with a realtor.


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