I recently sold my car and have $12,000 sitting in my bank account. I will also receive a small tax refund from the IRS, so I’ve been running the numbers in my favorite excel spreadsheets, trying to determine what on earth to do with this money.
As I mentioned in a previous post, I’ve been quite sick for about a year now, so I’m considering putting the money into a savings account in case I’m unable to return to work on a full-time basis.
If I didn’t have a sizeable emergency fund, I would use the money to build one. But I do, so I think that’s out of the question.
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 by $11,708. I can buy a CD for just a little under the 4.875% rate.
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 NC, so if I put $10,000 towards that mortgage’s principal, it will save me $36,125 in interest over the life of the loan. That also saves me 1 1/2 years of mortgage payments.
So what do you think I should do? Should I use the money to pay down my very, very large mortgage?
I am only 28, so I fear that I am losing out on the beauty of compounding interest by paying down the house. At the same time, though, I’m looking at a current interest payment each month of $2,400+ a month.