This is a great movie based on the novel by Steven King if you have ever seen the movie you know what I mean, if you haven’t; well this is how it goes.
Andy, a wrongly convicted man goes to jail in the 1940’s and gets to experience all the wonderful things about prison. He eventually ends up running a scam for the warden, and then escaping thought the use of his rock hammer. His rock ‘hammer’ probably would fit in the palm of your hand, and it takes him 20 years to tunnel thru his wall to freedom. The way he did it was slowly and meticulously. There are very few things that I have be doing for 20 years other then eating and sleeping. I can not imagine being focused on something that intensely for that long.
Tunneling out of Shawshank is of course my metaphor for paying off my newly acquired mortgage. I owe somewhere in-between 100-200k on my house. This in itself is not remarkable at all, actually it’s probably very low compared to a lot of people. Why this is a big deal to me is the way that I am paying it off.
I got an excellent mortgage rate (less then 5.5%) and a relatively affordable house. So guess how much I pay down on that mortgage per month?
Around $150.
No I did not forget a zero, or move a decimal. I pay the same for my house per month that I do for my cable TV! The reason for this has to do with the way mortgages work. If you don’t know I highly suggest you look it up. But the short version goes like this:
Early in the life of the loan the payments are 80% interest 20% principal. As you pay down the principal the interested earned by the bank per month becomes lower so after a year maybe your 79/21, after two year your 77/23, after three years 74/26. You notice how the amount paid to interests is lower every year 80, 79, 77. 74? That is the “power of compounding” you can see this power demonstrated dramatically in putting extra towards your payment. If you had a 30 year 150k mortgage at 7% simply paying $100 extra per payment pay your house of seven YEARS earlier.
The math on that is
23 years of paying $100 extra: $27000
Saves you 7 years of mortgage payments: $75000
After my first year I am going to pay more on my mortgage, and try to tunnel out of Shawshank just a little faster…
Posted by fubar1383 
