Living Out the American Dream One Mortgage Payment at a Time

By Kate Flatley Lavoie
From The Wall Street Journal Online

If you look carefully at the staircase banister of the Elephant Hotel in Somers, N.Y., you will notice a small cameo embedded there. Legend has it that it was placed on the handrail by the building's 19th-century owner, Hachaliah Bailey, of Barnum and Bailey fame, as a subtle indication to all visitors that the building was paid for.

Paying off a mortgage was no small feat then, especially if you weren't a wealthy farmer and cattle merchant like Mr. Bailey. In fact, the word "mortgage" comes from French common law. Meaning "dead pledge," it was a fixed and absolute debt and put home ownership out of reach for most people. Though it was easier to accomplish here in the U.S. than in Europe -- Americans had homesteading programs and did not have to contend with noble landowners loath to relinquish their holdings -- only 46.5% of Americans owned their homes in 1900, and that number declined a bit during the Depression. Today, according to the Census Bureau, about 66% of us could put a cameo on our handrail.

These days, when people have sent that last payment to the bank they celebrate by going on a long-put-off vacation or, most commonly, throwing a mortgage-burning party. Having just bought our house in Somers (about six miles from the Elephant Hotel) this year, my husband and I are a long way from the cameo or any sort of celebration. How long? Well, I'm afraid I needed to pay better attention in high-school algebra to figure that out, because we have both a fixed-rate term mortgage and a variable-rate equity loan.

If your house costs X and it is Y square feet in size, what is your cost per square foot (F)? You make a downpayment of 10%. Your monthly mortgage payment is Z, but of that payment Q is interest. How much are you paying in principal (P)? And how many square feet do you actually own at the end of each payment?

It's enough to make me wake up in a cold sweat, especially during this volatile credit market when that Q number is all over the place. I never know what the bill will say when I open it.

I used to believe that since we made a 10% down payment at closing, we own 10% of the house outright -- for argument's sake, let's say that's the dining room. So, when we wrote and mailed the monthly check, I would take a moment to appreciate the roughly 1.6 more square feet of home that actually belonged to us -- say, a bit of the floor underneath the refrigerator.

But it's recently become clear that my theory has a few holes in it. Should we default on our mortgage (which please, nice people at Chase, take note, we have no intention of doing), we don't get to keep the dining room and 1.6 feet of kitchen. The bank will take the whole kitchen and caboodle.

It was something of a shock the first time I actually worked out the math. I knew we'd be paying interest; I just had no real conception that interest would constitute the vast majority of every payment we made. I was blithely figuring that with our regular payments and a few extra when we could afford them we'd have this mortgage thing done with well before our 30-year term. I have since been disabused of that notion.

But, for all the uncertainty about payments, we relish each of the additional square feet of home we seem to own each month. And, of course, we appreciate that the bank allows us to act as if we already own the place, letting us redecorate or make as much of a mess as we want to. The house with the white picket fence is a part of the American Dream for a reason -- having your own space, even bought in increments, is nothing short of bliss.

Thirty years from now, when we've mailed that last check and can safely occupy the last 1.6 square feet of the attic, I think we'll go a bit more dramatic than the banister cameo. The bank-note bonfire in the back yard is much more our speed.

Ms. LaVoie is the arts/graphics editor for the editorial page of The Wall Street Journal.