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1 year in the bank (CD/savings) is for multiple reasons. Mostly it's for that really nasty scenario where there's a major recession leading to household job los
by milesvp 9y ago
1 year in the bank (CD/savings) is for multiple reasons. Mostly it's for that really nasty scenario where there's a major recession leading to household job loss, when it can be particularly hard to find an equivalent replacement salary. And cash equivalent is important because selling assets in a down market is doubly expensive. Worse is a down market may make the mortgage lender even more likely to foreclose in the hopes of extracting some short term gains to offset losses in other investments. So you risk a losing your equity just by missing a single payment.
I certainly don't drop every dollar into my mortgage every month, it's just not worth the risk for a potential 4% return on investment.
- rahimnathwani 9y agoI don't know if these exist in other countries, but some banks in the UK offer an 'offset mortgage', where any balance in a specific current account at the same bank deducted from the loan amount when calculating interest. The last time I looked, they were a little more expensive than regular mortgages, but would be worthwhile for someone who keeps 6 months or more of mortgage payments in their current account.