This is going to be the party of the year, the biggest bash in memory. It’s a Mortgage Interest Party. At this affair I am going to demonstrate how the bank calculates mortgage interest. The manager of the mortgage bank will be present and he will confirm that the bank is not my friend.

My start-up mortgage

We were newly-weds when we saw the cottage. It had a red tile roof, wooden windows, one bedroom and a living-room-kitchen. The price was $4,000 and I never had a bean. I got on my knees in the mortgage bank and I was granted a mortgage of $3,800. I took a job as a night clerk at the motel to raise the rest of the money and a cash advance.  The cottage was ours, but it belonged to the bank.

Construction mortgage

Our first son was born a year later and I applied for a mortgage extension to add a room. Back to the motel to raise the missing dollars. Our son had his own room. I owed the bank close to $5,000. A year later another son arrived and again I was knocking on the manager’s door at the mortgage bank to raise funds to add another room and again I returned to the motel.

Major construction mortgage

In 1969 we decided to add a proper living room and remodel the kitchen. The bank hemmed and hawed for all of 2 minutes, told us what loyal and reliable customers we were and gave us a mortgage which was almost double that which we already had. All in all, I now owed the bank about $16,000. The 10 years of payments I had made, had made a dent in the interest, but the account was now so confused that I could no longer understand it. I think the bank had the same problem. The house is great and is very comfortable and we are enjoying it immensely. We applied for an extension to the mortgage to put down a pool.

A son leaves home

1979 and our eldest is off into the world to seek his fortune. I convert his room into my writing studio. Mortgage remains healthy, interest rates are up.

Another son leaves home.

Mortgage is static. I convert the new spare room into a painting studio. Interest rates up again.

We sell the house

It’s 1989 and we sold the house and bought this smashing apartment on the 45th floor of the new downtown tower block. Ocean and airport views, tangled traffic views on all 4 sides. Mortgage reduced. Interest rate on mortgage balance goes up again.

2009. Mortgage blossoms.

The letter from the bank was a surprise to me. “You now owe $120,000. Please call in at the bank and talk to us about this.”  How did this happen? And then it hit me – the interest rates and the interest calculations. There is no such thing as simple interest. Come to the party – you’ll see!

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