Hey @Jon Penton , depends on when you need the money. I'm assuming that will be sooner than 5 years? If so, then I don't think it is worth risking your down payment being invested in stocks, especially when your growth period is so small in this case. I would open a savings account with an online bank that pays approximately 1.5% (go to bankrate or google highest yield savings accounts).
@Jon Penton , congrats on your little one, and your "thinking ahead" mentality. My suggestion is to place your ongoing savings in the Bank that you believe (after research) will give you the best Loan terms in future. Develop a working relationship with at least one Loan officer, asap.
I don't recommend putting money into a new kitchen etc, if the reason you'd be doing so is because you believe that it would increase your home's appraisal in such a way as to make it easier to get a higher HELOC in future. Appraisals are based on sold comps, so if you're not actually selling, your new granite bench tops will not get you a higher HELOC!
[That's a similar argument that shopaholics use, always justifying spending, at every sale!]
It's your saving history that'll help you most, rather than whether it's $30k, or $35k. My 2c...
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