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Anonymous
Anonymous Question:

How much can I save by paying my mortgage off in one lump sum?

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PGroot
PGroot Answered:

If you have a mortgage of $100,000 at 5%, for 30 years, you will pay about $193,255 in total payments.  If you pay it off in a lump sum, you pay $100,000, or about half as much.  If you can invest your cash to earn better than 5%, you would be ahead to invest.  But bonds paying that much are risky.

The way it normally works is that a mortgage always costs more than you can earn in safe investments.  Today you can get about 2% on a CD.  You can get 2.5% on a 30-year Treasury bond.  And a new 30-year mortgage might cost 3.5%.

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