Q: A number of years ago, I took out a $124,000 15-year mortgage at 6.05 percent. I have just $37,000 left to pay on the mortgage. Would it be wise to make a lump sum payment of $10,000 on the principle to save on the interest? 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 a safe investment anywhere, including CDs, MMAs, etc.

A: Making a prepayment of $10,000 will certainly cut down the time you have left on the loan. Even if it 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 you might need it if something unexpected happens.

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If you have plenty of other liquid cash reserves, and you 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.

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