Q: A number of years ago, I took out a $124,000 15-year mortgageA Mortgage is a document granting a lien on a home in exchange for financing granted by a lender. The mortgage is the means by which the lender secures the loan and has the ability to foreclose on the home. at 6.05 percent. I have just $37,000 left to pay on the mortgage.
Would it be wise to make a lump sum of $10,000 on the principle to save on the interestInterest is money charged for the use of borrowed funds. Usually expressed as an interest rate, it is the percentage of the total loan charged annually for the use of the funds.? I know that every dollar I prepay on my mortgage earns the net interest rate of the mortgage.
It’s just that I can’t make 6 percent on safe investing anywhere, including CDs, MMAs, etc.
A: Making a prepayment of $10,000 will certainly cut down the time you have left on the loanA Loan is an amount of money that is lent to a borrower, who agrees to repay it plus interest.. Even if it only saves you a year or payments it may be a wise investment for you.
Just don’t use up all of your available cash. In other words, if all the cash you have in the world is that $10,000, I wouldn’t want to see you use up your liquid reserves in order to “earn” 6 percent on your money.
You might want to use that cash for something else or will need it if something unexpected happens.
If you have plenty of other liquid cash reserves, and can afford to put out this cash, then by all means go ahead. Once the loan is paid off, you’ll quickly be able to accumulate additional cash assets.