Where to put proceeds of a house?

[Apsmommy]

I am in the middle of a divorce. We have no debt except for the house. Once the house sells I should have approximately $200,000 my part. That isn't enough to buy a house here so I will rent for at least 4-6 years. At that point I will most likely move out of the area to somewhere that amount will allow me to afford a house.

I am medically disabled so I have a pension from my old job. My husband will give me child support for our 10yo dd. However, it just won't be quite enough. I will need to use the interest I earn off the money to supplement my monthly income. I thought that putting it in an OLB at 5.25% will get me another $875/month. I do need to some of the money easily accessible for things such as the braces dd will be getting at the end of the year.....things like that, although I need to minimize touching any principle. I will need a car within 2 or 3 years. With the rates lately, I think I will just pay cash so that will eat into the principle also unless I can find a way to not eat into the interest as much.

So anyway, what is the best place to put the money, no risk, that will earn me the most interest to supplement my income. Or is it just a crazy idea and there is some other way to utilize the money?

Thanks

[sweeps]

Yes, an online savings account paying greater than 5% would do fine. You may want to split your proceeds between 2 different banks to make sure your principal is totally covered by FDIC insurance.

Don't forget the interest is taxable so you won't actually get $875/month. It will be a little less or a lot less than that depending on your tax bracket.

Just out of curiosity, why don't you move earlier? If the houses are too expensive where you are, I assume the rents are expensive too. Why not move now and save a lot of money on 4-6 years of rent.

[anonymous_saver]

I know you will likely hate this idea, but have you thought of getting a roommate? This could help you costs until you get more on your feet financially.

What area do you live in? Because it sounds like you could have a very decent down payment. Could you fine maybe a $200,000-$300,000 condo? Then use maybe $150,000 of the proceeds to pay for a large down payment? I'm sure you have thought of this, but I just wanted to add another suggestion.

Do you think you will be able to go back to work someday? Or how do you think that in 4-6 years that you will be able to buy a house again.

Hope all becomes well for you.

[Aleta]

I would say that it also wouldn't be a bad idea to get some CD's and ladder them because you need the income. It would be good to lock in some rates now. Look, FNBO Direct Savings account is offering 6% APY until September. That might be something for you to think about. The APR is 5.84% compouded daily and credited monthly. Their is no minimum and it is online banking and you can link it to any local banks that you have.

[Apsmommy]

Thanks for the ideas. I hadn't thought about breaking the money up to ensure it is protected. Do you have a link for FNBO? Sounds like a good rate.

Couple of answers:
1. I live in South Florida. I plan to be able to buy a house once I move from this area. I can afford a small home here, but the insurance and taxes would put it out of my reach. Insurance and taxes on $300,000 (minimum down here) would be over $1000 per month plus the loss of the interest income would be more than I could do. Rent will be about $1600 per month.
2. No room mate---I'll eat mac and cheese first.....LOL.
3. I don't want to move right now because of my dd. She and her father are close, and I want her to still be able to see him weekly (He is an a-hole but she doesn't need to know that ). I don't think she is old enough to travel on her own yet.
4. Also we homeschool, but she attends classes one day a week at an accredited school. She has about 4 more years there. She takes math and science and loves it. I want her to finish. It isn't something that is readily available to homeschoolers anywhere else.
5. I won't be able to return to work. It is a permanent disability. I have Lupus.

Thanks for all of the help. Keep it coming. This is all new to me.

[disneysteve]

countrywidebank.com pays 5.4% on balances over 50K

You might also want to consider a money market mutual fund for some of the money rather than a bank account. Vanguard Prime is usually the top recommendation. I think they are at 5.12% currently. The rate is a bit lower but you would have check-writing from the account which makes access a bit easier so it might not be a bad idea to put some money in there.

[Ima saver]

Yes, it is a good idea to split the money up between banks. My bank pays 5.25 if you put in $50,000 minimum. I have done the same thing. So far, I have put $100,000 in each of 3 banks.
I agree with you renting. I have heard that the taxes and home insurance are so high, every one is moving. (and I think they are all coming here where taxes are much lower as is insurance)

[zetta]

Given your circumstances, I think it would be worth your while to pay for a good certified fiancial planner to put together a plan for you. Since you are permanently disabled, you need to guard against both principal loss and loss of spending power due to inflation. The right plan could make a big difference in your standard of living in the next 10 to 20 years.

[sweeps]

I reiterate my suggestion to move to a location with a lower cost of living. Living in an area with a high cost of living is fine if you're earning the big salary that goes along with it. But a fixed income (pension, disability income, interest income) is exactly that, fixed. You have to lower your expenses and moving to a cheaper area is a great way to do that.

[Aleta]

You can go to http://www.FNBODirect.com and you can sign up there. I also live in South Florida and I feel your pain with the taxes and insurance. It's a nightmare down here right now. I know that you want to be close to your daughter's father, but you also have to think about your situation. He's no longer in the picture for you and I know and admire you for wanting to do the right thing by your daughter. Hang it there.

[Aleta]

You can go to http://www.FNBODirect.com and you can sign up there. I also live in South Florida and I feel your pain with the taxes and insurance. It's a nightmare down here right now. I know that you want to be close to your daughter's father, but you also have to think about your situation. He's no longer in the picture for you and I know and admire you for wanting to do the right thing by your daughter. Hang it there. Do you have any other family members close to you that can help out?

[Apsmommy]

I don't have any family around to help. Thanks for the link. I have it saved for when the house sells (hopefully soon). I will have to stay here at least 4-6 years so I need to do the best I can.

[PharmacistRealtor]

I understand your fear and frustration as a health professional I see this all the time, but I see you 'cocooning' and shying away from the opportunities to improve your income and net worth because of fear. I saw you wanted to rent vs. buy but in reality you can easily purchase a home with the seller paying your 3% towards closing costs in this market and buy one whose cashflow from tenants exceeds your mortgage...my mortgage is $2000 a month but I only pay $800 after my renters pay me but the house is appreciating, I'm building equity, etc. etc. etc. I sincerely wish the best for you.

[DebbieL]

From what I gather, housing is tanking in Florida (and many other areas of the States) since the bubble burst. I think in a few years if you continue to rent, you may find the home you want has come well within your reach. The situation where I live is bad too. 6 or 7 years ago a house was selling for about $240K (which is still expensive in my opinion considering average household income here is only around 60K) - now they are at about $570K (and that's just average - nothing special). Ridiculous. I'm in Victoria, BC which has no real industry. It is a government town, tourism town and retirement place -that's it. So many people seem to think this housing boom will last forever - bs! I personally can't wait for it to crash (which it will - it always does). We here in Canada are about a year behind you guys, so I figure by this time next year we will start seeing the inevitable increase in foreclosures, etc. and price drops.
Good luck to you. Renting is a good option for now (since you can't relocate). There will come a time when it makes sense to buy - just not yet.

[greedy4chips]

A little off topic...but in response to housing prices

Housing prices here have remained relatively consistent if you look at monthly payments. When housing prices moved higher because of the lower interest rates, monthly payments remained virtually the same. Now that interest rates have moved back up the housing market in our area has returned to more 'normal' prices. We do have more homes on the market and our realtor friend says it is because people cannot afford the ARMs and cannot refinance since the home values have dropped.

People were buying homes based on monthly payments and not a home's value. Many did not take into consideration that rates would increase so quickly.

[Scanner]

I think an online bank is a good idea for you as the forum has suggested and splitting it between a couple.

What I am more worried about is a different subject you didn't bring up - a long term plan.

In my line of work, I see disabled people and they get kind of stuck in a pickle. On the one hand, they have to be disabled to get their health care (Medicare) and monthly check. If they make a certain income, they lose it.

But the income they make keeps them nearly impoverished.

It's a horrible trap.

You sound 40ish with your daughter and all and $200,000 is not much to make last over a lifetime. LIke you noted, I see you slowly chewing at the principle.

I know lupus has different presentations and different periods of exacerbation and improvement - I hope you can get a long term plan from your doctors to at least work part time, even if it's a desk job somewhere.

[Apsmommy]

Originally Posted by Scanner

I think an online bank is a good idea for you as the forum has suggested and splitting it between a couple.

What I am more worried about is a different subject you didn't bring up - a long term plan.

In my line of work, I see disabled people and they get kind of stuck in a pickle. On the one hand, they have to be disabled to get their health care (Medicare) and monthly check. If they make a certain income, they lose it.

But the income they make keeps them nearly impoverished.

It's a horrible trap.

You sound 40ish with your daughter and all and $200,000 is not much to make last over a lifetime. LIke you noted, I see you slowly chewing at the principle.

I know lupus has different presentations and different periods of exacerbation and improvement - I hope you can get a long term plan from your doctors to at least work part time, even if it's a desk job somewhere.

I am 41. My situation is a bit different. My disability is from my previous job. At that job I was required to maintain a current physical. With Lupus I was decertified to perform my job. Not that I couldn't, but that was just a disqualifying condition. They had no choice but to allow me early retirement basically. I have private insurance. I don't even receive social security disability. I could actually work if absolutely necessary, but I have chosen not to until my dd is grown. With my check and child support we will be ok, just not as well off as we are with me married as my husband makes a good deal of money.

Thanks for all the help and info everyone.