I have recently sold my car and have $12,000 sitting in my bank account. In addition I will be receiving a small tax refund from the IRS. So I have been running the numbers in my favorite excel spreadsheets trying to determine what on earth to do with this money.
As I mentioned in some previous postings I have been quite sick for about a year now, so in the back of my mind I am wondering if I should keep the money safe in the bank in case I am unable to return to work on a full time basis. But I do have a sizeable emergency fund already.
So here’s my dilemma: I currently have two fairly sizeable mortgages. The first, has $208,076.67 remaining but it’s a 15 year mortgage at only 4.875%. So it would be pretty crazy to add that lump sum toward the mortgage. It would only reduce the total interest paid by $11,708. And I can buy a CD for just a little under the 4.875% rate. Plus I’d be foregoing the mortgage deduction at tax time.
My second mortgage is currently $490,051.04 at 6.0% for 30 years. Yes, I realize that’s an insanely large mortgage, but it’s on a beach property in Duck, NC. So if I put $10,000 towards the principal of that mortgage it will save me $36,125 in interest over the life of the loan. And save me about a 1 1/2 years of mortgage payments.
So I really need the help of all of you pfbloggers out there. Do you think I should invest the money in a CD, in the stock market, etc. Or should I use the money to pay down my very, very large mortgage?
I am only 28. So I fear by paying down the house, I am losing out on the beauty of compounding interest. At the same time though, I’m looking at a current interest payment each month of $2,400+ a month.