The Prince George's enquirer and southern Maryland advertiser. (Upper Marlborough, Md.) 1882-1925, 1917-02-02
How Farmer Can Buy.

The question has been frequently
asked, Chow 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?'
Frank R. Wilson, of the Federal Farm
Loan Bureau, answers it: by means OF
first mortgage given under the Farm
Loan act for so per cent of the purchase
price-provided this does not exceed 30
per cent of the Apr aised value-and a
second mortgage given to the former
owner of the land or to bank or pri-
vate money lender for the balance.
1t must be born in mind that the
amount which can be borrowed under
the Farm Loan act is limited to 20 per
cent of the appraised value of the land,
and this is written on the assumption
that the tenant will not pay more for
his land than it is actually worth or, in
other words, its appraised value as con-
templated under the Farm L IAN act.
To furnish concrete example: Sup
pose John Smith, a renter, wants to buy
100 acres of land, valued at $50 an acre.
The total purchase price would be 5000,
but John Smith has not the money to
buy it. Under the Farm Loan act
Smith would be entitled to borrow
So, 500 of the appraised value, if this ap'
praised value should be the same as the
purch ase price. This would leave $4,000
to be handled by a second mortgage.
The amount borrowed under the Farm
Loan act could b paid to the original
owner of the land and a second mort
gage executed for the difference.
The original owner would thus get q
satisfactory payment down, and if he
had confidence in the purchaser he
would prob ably b. willing to accept a
second mortgage for the balance, div
ided into 10 annual payments.
Here is the way it would figure out;
The first mortgage Of So, 500 given un-
der the Farm Loan act would draw, let
US say, ST per cent interest and would
be paid off on the installment plan
through period of 40 years by making
annual payments of $l55.95. Now, lei
US say that the second mortgage woulc
draw 3 per cent and could be arranged
so as to be retired in 10 years. The in
terest on this 80 500 mortgage at 6 pei
cent would be $3.50 the first year ant
one.tenth of the $4,000 would be $3.50
Adding the interest and the one tentl
annual payment would mean a pay
ment of $500 on the second mortgage
the first year. The second year pay
ment would be $685., and the following
payments through the 10 years to retire
the second mort gage, both principal ant
interest, would be $3.50. 1856, $40, 1925
1910, 1926, $3.50 and 1866.
On top of all these annual payment:
| would be the $l55 95 interest and am or
tization payments on the first mortgage
| to the Federal Loan Bank, so that the
total payments, interest and principal
on the two mortgages would begin
1856 IS and dwindle down to 1920 81
the tenth year, and after that only 1856
95 each year.
If the terms of the second mortgage
could be arranged for longer than II
years, the required annual payment
would be correspondingly reduced.
These payments are no greater thar
the average tenant pays for rent. Ths
frst-year payment on both of thes
mortgages would amount to approxima.
tely $3.50 an acre. These would gradu
| ally reduce until the tenth year b.
would be paying $40 an acre and eacl
year after that he would be paying onl,
$l.55 per acre year. Instead of bein.
paid as rental this money is applied on
the purchase price of the land.