One option is to pre pay your home. But how will you do that? Will you just apply the extra $5000 toward your mortgage? If you have a mortgage of $300,000 at 6% and you paid one lump sum of $5000 to the principal you would pay your mortgage off 12 months early. You could also take the same $5000 and deposit it in a savings account. Assuming you are earning 5%. Put $250.00 a year in interest towards the principal. Y
our mortgage is paid off 7 months early. You will still have the original savings of $5000.
The savings if you paid the lump sum of $5000 toward the principal would be $16,714, if you paid $250.00 a year toward the pricipal your savings would be $7569.
What would you do with and extra $5000?
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