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Wednesday, August 31, 2005

Coming up with Money for Down Payment

I have to put a down payment for my house but I don't have all the cash available, so I'll have to liquidate my long-term investments. I had set up a 5-year CD ladder of a thousand dollars each in the beginning of this year with ING DIRECT, but I'll have to withdrawal early and take the penalty. The penalty is half the interest earned, so it's better to withdrawal now than later. Does anyone know if I can report the loss interest on the 1040, and do I get deductions on that? I usually do my own taxes, but this year's tax form is going to get complicated so I may hire an accountant. I also will have to liquidate my long term stock holdings. I really don't want to sell my stocks because they've gone down during the stormy market. I want to wait until my portfolio recovers a bit, but I may not have a choice. I'll have to transfer my money from stocks and CDs over to the house, so I hope this real estate property is going to cover all my opportunity costs.

20 Comments:

At 8/31/2005 10:43:00 AM, Blogger The Dividend Guy said...

Just wondering what long-term stocks you will liquidate - the ones with a gain or the ones with a loss? The reason I ask is that I am trying to get people's view points on when to sell a stock.

 
At 8/31/2005 11:05:00 AM, Blogger Smarty said...

I have both short term gains and short term losses right now. Which ones should I sell?

 
At 8/31/2005 11:21:00 AM, Blogger Brian said...

How is your credit? Perhaps a no-fee 0% balance transfer would make sense in this situation. You'll have to decide if the risk of the extra debt is worth it, but it would save you from having to prematurely liquidate your investment assets.

 
At 8/31/2005 11:41:00 AM, Blogger Jose Anes said...

Yes, it hurts to do this to buy a home.
You end up with NOTHING after you buy the first house.

But you will recover. You are responsible, and you will build up again.

BTW... Just sell the stocks you think will appreciate the less (or even go worse). (loss or gain, thats not the issue.. it is if you will get them to appreciate or not).

The 0% balance transfer thing is a great idea. (those checks they send sometimes, without penalties... I think Capital One offers them).

Money And Investing

 
At 8/31/2005 12:16:00 PM, Blogger Smarty said...

My credit is good. I may want to do the no-fee 0% balance thing now.

 
At 8/31/2005 02:41:00 PM, Blogger Brian said...

Citi is known to provide no fee 0% balance transfers on their cards for a 12 month period. Other offers I have seen recently require a one-time fee to do the balance transfer, but you have a longer period to pay the balance off. Just make sure you can afford the minimal payment (usually 2% of the balance) on time each month, else you'll be stuck in a much worse situation than had you sold your CDs and stocks!

One more thing to think about before you do a balance transfer is how it will affect your credit. Have you been pre-approved for a home loan? If you're taking out a large amount of credit your credit score will suffer until you get your utilization under 30% or so...good luck!

 
At 8/31/2005 03:50:00 PM, Blogger savvy saver said...

The loss (penalty) of interest earned cannot be deducted on a 1040, but it also does not need to be reported as income.

 
At 8/31/2005 04:10:00 PM, Blogger 1 said...

The down is real pain in the ass, you feel so poor after you pay it. I'm not sure how you balance transfer from a credit card into cash. I think you can only transfer other card balances.

NYC Money

 
At 8/31/2005 05:36:00 PM, Blogger Money Turtle said...

I'm kind of in the same boat. If I go through my condo purchase, I will have to sell some stocks. If I do sell, I will juggle a bit (take some with capital gains and off set with long term losses). Another option is to use some margin debt - it would only be 20% of my equity and slowly sell off some holdings.

 
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At 9/01/2005 09:06:00 PM, Anonymous Anonymous said...

Given that you are buying this house as an investment rather than to live in, are you sure it is wise to be cashing in all your other investments and incurring penalties to do it?

 
At 9/01/2005 09:32:00 PM, Blogger Smarty said...

I don't have a choice. I do not have enough cash available.

 
At 9/02/2005 08:06:00 PM, Anonymous Anonymous said...

You have a choice about investing your money in stocks vs. a house in Philadelphia that you may be buying at the peak of a real estate bubble. There was a recent article about stocks being a better long term investment than real estate, did you read it?

 

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