Here's Why I Didn't Keep My Home Down Payment in a CD -- Even With Rates at 5%

Sometimes it feels as if the universe is laughing at me. Case in point: At the end of 2021, I decided that I wanted to get a mortgage and become a homeowner, after years of vowing I never would again. In my defense, my first experience with homeownership ended badly, with a short sale and a tanked credit score that took years to improve.

But once I'd made the decision, I watched mortgage rates soar from around 3% all the way to about 7% by spring 2024, when I planned to actually make the home purchase. Since buying a house was going to be so much more expensive thanks to higher rates and home prices, it was even more crucial that I find the right bank account to keep my cash. That meant one that earned a decent APY.

Certificates of deposit (CDs) have seen rates of 4% and 5% lately, thanks to some of the same economic conditions that have sent mortgage rates soaring. You might think it would be a slam dunk to have kept my house down payment in one -- but I didn't, and opted for a high-yield savings account instead. Here's why.

I was actively saving

As much as I'd love to say that it was super easy to put together tens of thousands of dollars to first entirely get myself out of debt and then save for a house down payment (and related costs, like an inspection, an appraisal, moving, and more), it sure wasn't. It took me about two years to save this much, all told, and I was actively saving money just about every week.

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Product	APY	Min. to Earn
American Express® High Yield Savings Member FDIC. APY 3.80% Rate info 3.80% annual percentage yield as of January 9, 2025. Terms apply. Min. to earn $0 Open Account for American Express® High Yield Savings On American Express's Secure Website. Member FDIC.	3.80% Rate info 3.80% annual percentage yield as of January 9, 2025. Terms apply.	$0	Open Account for American Express® High Yield Savings On American Express's Secure Website.
Capital One 360 Performance Savings Member FDIC. APY 3.80% Rate info See Capital One website for most up-to-date rates. Advertised Annual Percentage Yield (APY) is variable and accurate as of Dec. 6, 2024. Rates are subject to change at any time before or after account opening. Min. to earn $0 Open Account for Capital One 360 Performance Savings On Capital One's Secure Website. Member FDIC.	3.80% Rate info See Capital One website for most up-to-date rates. Advertised Annual Percentage Yield (APY) is variable and accurate as of Dec. 6, 2024. Rates are subject to change at any time before or after account opening.	$0	Open Account for Capital One 360 Performance Savings On Capital One's Secure Website.
Western Alliance Bank High-Yield Savings Premier Member FDIC. APY 4.40% Rate info The annual percentage yield (APY) is accurate as of Jan. 2, 2025, and subject to change at the Bank’s discretion. Refer to product’s website for latest APY rate. Minimum deposit required to open an account is $500 and a minimum balance of $0.01 is required to earn the advertised APY. Min. to earn $500 to open, $0.01 for max APY Open Account for Western Alliance Bank High-Yield Savings Premier On Western Alliance Bank's Secure Website. Member FDIC.	4.40% Rate info The annual percentage yield (APY) is accurate as of Jan. 2, 2025, and subject to change at the Bank’s discretion. Refer to product’s website for latest APY rate. Minimum deposit required to open an account is $500 and a minimum balance of $0.01 is required to earn the advertised APY.	$500 to open, $0.01 for max APY	Open Account for Western Alliance Bank High-Yield Savings Premier On Western Alliance Bank's Secure Website.

This was the first reason I opted for a high-yield savings account instead. Once you've opened and funded a CD, you're not allowed to add more money to it. Your money is locked in for the duration. And sure, I could have opened multiple CDs (perhaps every time I reached a saving milestone, like $5,000 or $10,000), but I didn't want to complicate my life any further by giving myself even more bank accounts to manage.

I already had the HYSA to store my quarterly tax payments (freelance life). So using it here was easy -- I even set up a savings bucket for my house money.

I wasn't 100% sure of my timeline

I also avoided CDs because when you open one, you commit your money to a set term. So you've got to be pretty sure of when you'll need the cash, because you'll pay an early withdrawal penalty if your plans change and you need it sooner.

It's been a hard few years for home buyers, with way more competition for fewer available homes, along with those higher prices and mortgage rates. (See what I mean about the universe laughing at me?) Plus, I was a very picky home buyer. I knew I'd know the right house for me when I saw it, and I had to wade through a lot of junk first.

And by junk, I mean homes that were in the wrong neighborhood, or needed too much work -- I wanted move-in ready after years of living in an apartment that needed a ton of repairs that it never got. So I didn't know how long it would take me to find the right house -- and as it turned out, it happened sooner than expected.

Since I had my money in a HYSA, I could withdraw and use it immediately -- no early withdrawal penalties necessary.

I did myself a favor by choosing a HYSA instead

Ultimately, using a high-yield savings account for my house down payment was a better idea than using a CD. I earned a comparable rate on my HYSA (around 4.00% APY) for most of my savings timeline, and I had that essential flexibility. Plus, a HYSA is a bank account with an undefined timeline.

So even now, as I write this from my beautiful home office in my beautiful house, I still have the HYSA. The savings bucket that once held my down payment and other house savings became my emergency fund after I moved. I still have easy access to that money. If it had been in a CD, I would have needed to open a new bank account for it after the CD's term expired.

CDs are great if you want to lock in a high APY for a predetermined period. But they might not be the best fit if you're saving for a home. In this instance, a HYSA will do you just fine.