Hello, I have 1 year worth of salary in savings and I was thinking to keep 6 months worth of salary and the rest to pay in the mortgage principle to reduce the interest. Also, not to add any balance in savings until I payoff mortgage to save on interest.. What would you suggest in this case?
I’d suggest balance. If you are happy with the level of savings you will end up with then go for it. Will your overpayment be penalty free? You need to work out the figures and make sure it’s the wisest thing to do. Personally I have a number for my savings, when I go above it I am happy to siphon off money and put it into my mortgage.
I would keep the savings as savings to cover big repair or job loss/reduced hours.
Work out how much spare money is comfortably available after bills/food/transport and fun spend and put that into over paying the mortgage.
Depending on what other aspects such as if you have a family / life insurance / health insurance I think 6 months worth of salary should be enough of a buffer. If you were to lose your job you have 6 months to find another.