The Farmington times. (Farmington, St. Francois County, Mo.) 1905-1926, 1917-01-26
HOW TENANT MAY BUY
FARM UNDER FEDERAL
FARM LOAN ACT

The following article by Frank R.
Wilson, of the Federal Farm Loan
Bureau, tells how a tenant farmer
may buy and pay for a farm of his
own under the Federal Farm Loan
Act:
Washington, Jan. 19.--The ques-
ton frequently has been asked:
"How can a renter who has not saved
so per cent of the purchase price OF
land make use of the Federal Farm
Loan Act to get land of his own? ?"
The answer is, by means of first
mortgage given under the farm loan
act for so per cent of the purchase
price-provided this does not exceed
SO per cent of the appraised value
and second mortgage given to the
former owner of the land or to bank
or private money lender, for the bal
ance.
1t must be borne in mind that the
amount which can be borrowed under
the farm loan act is limited to so per
cent of the appraised value of the
land, and this is written on the as
sumption that the tenant will not pay
more for his land than it actually is
worth.
To furnish concrete example:
Suppose John Smith, renter, wants
to buy hundred acres of land, val
ued at $50 an acre. The purchase
price would be $4,000, but John Smith
has not the money 10 buy it.
Under the farm loan act, Smith
would be entitled to borrow $1,000 of
the appraised value, if this appraised
value should be the same of the pur-.
chase price. This would leave $1,000
to be handled by second mortgage.
The amount borrowed under the farm
loan act could be paid to the original
owner of the land and a second mort
gage executed for the difference.
The original owner would thus get
a satisfactory payment down, and if
he had confidence in the purchaser,
he probably would be willing to ac-
cept second mortgage for the bal
ance, divided into ten annual pay
ments.
Here is the way it would figure out:
The first mortgage of $1,000 given
under the farm loan act would draw,
let US say 5 1-2 per cent interest and
would be paid off on the installment
plan through a period of forty years
by making annual payments of $780,
Now let us say that the second
mortgage would draw per cent and
could be arranged so as to be retired
in ten years. The interest on this
$500 mortgage at 6 per cent would
be $3.50 the first year, and one tenth
of the $1,000 would be $3.50.
Adding the interest and the one
tenth annual payment would mean a
payment of four hundred on the sec
ond mortgage the first year. The
second year payment would be 1885
and the following payments through
the ten years to retire the second
mortgage, both principal and interest,
would be $3.50, $685., $340, 1925, $50,
1895, $3.50, and $265.
On top of all these annual payments
would be the $155.95 interest and am
irritation payments on the first mort
gage to the Federal Land Bank, so
that the total payments, interest and
principal, on the two mortgages
would begin at $555.95 and dwindle
to $420.95 the tenth year, and after
that only 1885 each year.
If the terms of the second mort
gage could be arranged for longer
than ten years the required payments
would be correspondingly reduced.
These payments are no greater than
the average tenant pays for rent. The
first year payment on both mortgages
would amount to approximately $3.50
an acre. These would gradually re-
duce until the tenth year he would
be paying $4.20 an acre, and each
year after that he would be paying on
ly S1.55 an acre year. Instead of
being paid as rental this money is
applied on the purchase price of the
land.
The interest rates quoted in this
instance are suggestions only and are
not to be taken as an official state
ment of what rates will prevail under
the farm loan act.