No. of Recommendations: 3
You need to examine the cash flows. rather than trying to figure out what an ROI based on a projected equity amount really means. There are four cash flows, two each for the two options:

1. Financing $90,000 @ 8% for 10 years results in
a $1117.00 monthly payment, or $134,040 for the
10 years....$44,040 in interest cost.

2. You have lost the opportunity to invest your
downpayment: $10,000 @ 11% for 10 years =

Total financing cost: $ 72,434

3. By prepaying, you lose the investment income
from your $100,000: $100,000 @ 11% for 10 years
equals $ 283,940

4. You can invest the monthly payment, since you
don't have a mortgage: the future value of
$1117 @ 11% (monthly) is $ 218,054

Total prepayment cost= $65,886

The actual cost of financing is $6548. This works out to about $55 a month. If you assume there is some risk in the 11% return rate (and there is always risk), then prepaying may not be such a bad option.

Let me note that I actually used yearly numbers, rather than monthly, so the totals are off a little bit.

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