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It's a Lucrative Time to Have Cash in the Bank

With mortgage rates still flying high and housing prices elevated, you may be holding off on a home purchase in hopes that things will become more affordable. So where should you sock away your down payment money in the meantime?

Fortunately, it's an excellent time to stash cash in the bank, as interest rates are also at historic highs. That's thanks to the Federal Reserve's aggressive fight against post-pandemic inflation, in which it raised its benchmark interest rate 11 times from 2022 to 2023. That, in turn, pushed banks and credit unions to keep raising their savings, money market, and CD rates.

As a result, it's easy to earn more than 5% on your down payment funds—potentially even as much as 5.75% APY—with one of today's record deposit rates. And you have multiple good options for how to do it.

If You're Unsure When You'll Buy, Try a High-Yield Savings Account

If you don't know how soon you'll jump on a housing opportunity, you'll want to keep your money fully accessible. High-yield savings accounts offer this feature, allowing you to make deposits and withdrawals whenever you like. But just because an account is called "high yield" doesn't mean it's offering a truly competitive rate—so always be sure to shop around.

We make the research easy with our daily ranking of the 15 best savings account rates that are available to anyone nationwide. The current leading rate is 5.50% APY, available from , and plenty of other options in our list pay 5.15% APY or better.

Compare that to the national average savings account rate of 0.46% APY and you can see that you stand to earn quite a bit more by putting your down payment money in a top-paying savings account. For instance, holding $25,000 in an account paying 5.25% APY will earn you about $106 per month in interest. Meanwhile, an account offering the national average of 0.42% on the same amount won't even pay you $10 a month.

To keep things risk-free, just make sure the high-yield savings account you open is at either a bank that's insured by the Federal Deposit Insurance Corporation (FDIC) or a credit union insured by the National Credit Union Administration (NCUA). By sticking to member institutions of these two federal agencies, your deposits up to $250,000 will be protected in the unlikely event that the bank or credit union fails.

A Money Market Account Adds Check Writing

Another option that keeps your money liquid—meaning accessible whenever you want it—is a money market account. Traditionally, money market accounts were geared toward banking customers who could keep a large balance in the account, and the rates tended to be higher than what the bank paid on savings accounts.

But times have changed, given the rise in popularity of high-yield savings accounts. To compete, many money market accounts have low minimum balance requirements or even no minimum at all. While sometimes the top money market rate is higher than the top high-yield savings account rate, it can go either way. An added feature you can get with a money market account is the ability to write checks. So if you find this feature useful, seek out one of these accounts. Otherwise, just choose whichever account type offers you the highest APY with account requirements that fit your needs.

Once again, we do the rate research for you, as every morning we publish our ranking of the 15 best money market accounts. Today you can earn up to 5.35% APY from . As with savings accounts, be sure the bank or credit union offering the money market account is an FDIC or NCUA member to keep your deposit safe from any risk. (All institutions must meet this requirement to qualify for our various rankings.)

Won't Buy for a While? Consider a Top-Paying CD

If you don't plan to buy a home for at least three months, you may be able to earn even more interest by investing some or all of your down payment in a high-paying certificate of deposit (CD). In some CD terms, you can earn more by committing to a certificate than by simply keeping your money in a savings account.

But what you also gain is a rate promise. Whether you choose a CD term of 3 months, a year, or even longer, the rate you sign up for is the yield you'll be paid until the CD matures. Even if the Federal Reserve moves to lower its benchmark rate, your CD return is locked and guaranteed.

Today's leading rate on a nationally available CD is 5.75% APY, which is available for 6 months from . But you'll find a lot more choices than that in our daily ranking of the best nationwide CDs, with 10 CDs paying at least 5.50% APY and many others paying above 5%.

The downside to a CD is that you have to keep the funds on deposit for the full CD term. Otherwise, you'll be hit with an early withdrawal penalty that will reduce your earnings. So it's smart to choose your CD term carefully based on the earliest date you think you'll want to make your down payment. You can also shop around to make sure the CD you choose has a mild penalty policy instead of a harsh one.

Just as with savings and money market accounts, opening a CD with an FDIC-insured bank or NCUA-insured credit union will protect your funds in case the institution fails, making CDs virtually risk-free.

How We Find the Best Savings and CD Rates

Every business day, Investopedia tracks the rate data of more than 200 banks and credit unions that offer CDs and savings accounts to customers nationwide and determines daily rankings of the top-paying accounts. To qualify for our lists, the institution must be federally insured (FDIC for banks, NCUA for credit unions), and the account's minimum initial deposit must not exceed $25,000.

Banks must be available in at least 40 states. And while some credit unions require you to donate to a specific charity or association to become a member if you don't meet other eligibility criteria (e.g., you don't live in a certain area or work in a certain kind of job), we exclude credit unions whose donation requirement is $40 or more. For more about how we choose the best rates, read our full methodology.