There has been considerable discussion in the news media that a homeowner should make double mortgage payments or extra payments on his or her $30-$year mortgage. In doing so$,$ the homeowner would save "large" amounts of interest payments and own their home in less than $30$ years.

Others have contended that the second payment should be placed in a financial instrument instead of being placed against the mortgage. This approach purportedly would allow the homeowner to pay off the unpaid mortgage after a few years of savings $($or $30$ years for comparability$)$ and still have funds in the alternative investment.

Your assignment is obvious. Which philosophy is best? You should assess the creditability of making additional payments to a mortgage instrument and determine if the taxpayer is better off financially if they make extra payments to their mortgage or to an investment vehicle. The size of the mortgage, interest rate, rate of return on the investments are left up to you. Of course, you will need to back up your assumptions with hard facts or data from the Internet or hardcopy. Your analysis should present the advantages and disadvantages of each strategy under "reasonable" assumptions and provide insight.

To maximize your performance on this assignment, you need to compare the $30-$year fixed payout stream with two alternative strategies. One alternative would be a $30-$year balloon mortgage. That is$,$ you pay the interest only for $30$ years and then pay off the principal at the $30-$year mark. The other alternative can be any strategy that you feel comfortable with. That is$,$ it might be a $15-$year payout program or a double payment. It is your choice. But keep in mind that the projects MUST be equivalent investment projects to insure the fairness of the comparison. That means if there is a tax savings received in one alternative, you need to reinvest that amount to equalize the strategies.