For the past few months, Perpetual Federal Savings -- the area's largest savings and loan association -- has been writing selected customers to offer a discount ranging from 10 percent to 20 percent in exchange for early repayment of mortgages.

While Perpetual noted the arrangement's obvious advantages to the S&L -- it gets back money lent at low rates to lend again at high rates -- the association also called it "a great opportunity for our customers."

The Washington Post asked its family financial adviser, E. M. Abramson, to examine the advantages and disadvantages the Perpetual proposal created for one customer. The customer provided details about his finances on the condition that his name not be used.

Abramson found that in this instance (which could apply to other homeowners in similar circumstances) the Perpetual offer could cost the customer from $400 to $3,000 depending on how he invested his money. It must be assumed that the customer would be making maximum use of the money he otherwise would be paying back to Perpetual. Not included in the calculation is the risk factor that some investments may turn sour.

"You can pick up in today's money market approximately the same money they can" with the funds you retain, Abramson said. In addition, by saying yes, a customer may trade an income-tax deduction for additional tax liability.

"There are defintely going to be cases where it's not to a person's advantage to pay it off," said Perpetual President Thomas Owen. "It depends on a customer's tax bracket, on the remaining balance and the original monthly payment."

Owen said the biggest advantage is how it affects a customer's cash flow and the advantage of owning a home free and clear. "I don't think it's a program that is for everybody, and that's obvious from the response," he said. Owen noted that the buy-back program ultimately may help Perpetual with its taxes.

The customer whose circumstances Abramson examined owed $21,108, payable over 16 years at a long-ago rate of 6 3/4 percent. Perpetual's offer was extended to customers holding mortgages at rates of 9 percent and below.

The estimated interest to be saved by taking advantage of Perpetual's offer was $11,500. But at the same time, based on the customer's high tax bracket, he would forfeit an estimated $6,800 in D.C. and federal taxes saved through the interest-rate deduction. That leaves a net cash saving of approximately $4,700.

On top of that, the customer would be eligible for a 15 percent discount from Perpetual for paying off his mortgage now. The discount would be worth about $3,100, bringing total savings to approximately $7,800. However, Abramson added that an Internal Revenue Service spokesman said it appeared as if the customer would be liable for taxes on the $3,100 saved through the discount.

Tax increases would reduce the savings to $5,900.

To get the discount, the customer must pay $17,942 -- the principal still owed on the mortgage after the discount is subtracted.

To finish the analysis, Abramson assumed that the customer declined the offer, retaining the $17,942 to invest, with the amount available to invest declining each month by the amount of the monthly mortgage payment.

"If he didn't pay off and kept the $17,942 and invested it in corporate bonds paying about 11 percent," the customer could earn about $15,800 over the 16 years. After taxes, the earnings would amount to approximately $6,300.

In that case, the customer could be $400 better off by not taking Perpetual up on its offer.

Owen noted, however, that industrial bond rates quoted yesterday were in the range of 10.12 percent to 10.39 percent rather than at 11 percent.

If the customer invested in tax-exempt bonds rather than corporate bonds -- a better investment considering his tax bracket -- the difference would be more dramatic. Assuming an 8 percent rate of return, the customer could earn approximately $8,800 with the $17,942 and would be almost $3,000 better off by declining the offer.

"The only offsetting advantage is the psychological relief of having the mortgage paid off," said Abramson.

Owen said he expects Perpetual will continue to make similar offers to customers in the future. "Perpetual is particularly fortunate in that our reserves are the third highest among 100 major banks and savings and loans, so we can afford to take losses -- which we are doing on this offer," he said.

On the other hand, the loss will be recouped by Perpetual when it relends the money paid back under the program. Owen also said that registering the loss on its books will help with the association's taxes.

"Since our reserves are so high, we no longer qualify for the bad-debt deduction almost every other S&L in the country qualifies for," he said. With that deduction, Perpetual could be paying 30 percent taxes rather than 46 percent, he said.