Driving a hard bargain - Mary Holm

th for 25 years and the interest rate is 8pc.

The last payment in 300 months' time will cost you $136.24 in today's money. You've spent 300,000 citrus dollars but, in today's money, your mortgage cost its original amount, less than $130,000, to pay off.

Now let's say that you could afford to pay $1100 a month instead. Your mortgage would be paid off in 232 months and you will have paid about 255,000 citrus dollars but, in today's money, it still cost the same $130,000.

The impact on your "wealth" is determined by what you would otherwise do with the extra $100 a month.

A: This is all getting a bit marmaladey. But you make an excellent point.

In other contexts, I've written about the time value of money and I should also do it when talking about the total cost of a mortgage.

Let's assume we've always got several thousand dollars of spare cash, so availability is not an issue.

If we have the choice of paying $1000 now or in a year, we should always choose to pay in a year. Ten years would be better still.

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