DEAR BOB: Our home mortgage is about $18,000 at 9 percent annual interest. My wife wants to pay it off with a savings certificate that will mature shortly. I think we should invest the money in some land. Which do you think is best? Myron T., Annandale.

DEAR MYRON: Neither is a very good alternative. Paying off a mortgage with 9 percent interest early is downright stupid. Considering your income tax savings for the interest deduction, your true annual interest rate is probably only about 6 percent. Never again will you be able to borrow so cheaply.

Buying vacant land, however, can be equally foolish unless it produces an income or you can use it for immediate personal use. Costs of holding vacant land are at least 20 percent per year of its purchase price, after considering property taxes, mortgage interest (or lost earning power of your money if you pay all cash), reseale costs, and upkeep.

A better alternative would be to invest your money in good income property, such as commercial property, rental houses, or apartments (in areas without rent control or the threat thereof).

DEAR BOB: My husband lost his job and then, the next day, accidentally broke his leg. He will be unable to work for at least six weeks. I can't work either as we have three little children to care for. This means we won't be able to meet our mortgage payment this month or next. Should we keep quiet about it or is it best to phone the lender to explain? Sara M., Washington.

DEAR SARA: Notify the lender immediately. Most lenders can arrange for a payment moratorium by adding the missed payments to the principal balance of the loan. Your lender will respect you for taking the initiative. If possible, visit the lender in person to work out a mutually acceptable payment program to meet your family's financial abilities. Believe it or not, your lender doesn't want to foreclose and will try to avoid that result if at all possible.

DEAR BOB: We were recently offered a home for purchase. But the problem was that the seller wanted to take back the mortgage for us on an "interest-only" basis. In other words, all our payments would go toward interest and none would go to principal. I rather liked this idea since all our payment would be tax-deductible as interest, but my wife is against the idea because we wouldn't be building up any equity on the mortgage. There was to be a balloon payment in seven years. What do you think? Burton Y., Bethesda.

DEAR BURTON: I think you should have taken that mortgage. The reason is that most of your equity increase today on a home comes from its market value appreciation, due mainly to inflation, not from mortgage reduction.