The Leon reporter. (Leon, Iowa) 1887-1930, 1917-02-01
How Landless May Make Use OF Farm
Loan Act to Get Farms.
(By Frank R. Wilson, of the Federal

(By Frank X. wilson, or the feuefal
Farm Loan Bureau.)
The question has been frequently
asked, Hon can renter who has
not saved 90 per cent OF the purchase
price of land make use of the FEEDER
al Farm Loan Act to get land OF his
own"
The answer is, by means Of a first
mortgage given under the Farm Loan
Act for SO per cent Of the purchase
price-provided this does not exceed
80 per cent Of the appraised Value
and a second mortgage given to the
former owner OF the land or to
bank or private money lender, for
the balance.
amount which can be borrowed under
| the Farm Loan Act is limited to 80
per cent OF the appraised value of the
! land, and this is written on the as
sumption that the tenant Will pay not
more for his land than it is actually
worth, or, in other words, its apprals-
ed value as contemplated under me
Farm Loan Act. TO furnish con-
crete example, suppose John Smith,
renter wants to buy 90 acres of land,
valued at $50 per acre. The total pur1
chase price would be $4,000, but John
smith has not the money to buy it,,
Under the Farm Loan Act, Smith
would be entitled to borrow $1,000 OF
|
value should be the same as the pur-
chase price. This would leave $500
! to be handled by a second mortgage.
| The amount borrowed under the
! Farm Loan Act could be paid to the
original owner Of the land anu a
second mortgage executed for the
difference
The original owner would thus get
satisfactory payment down, and If
| he had confidence in the purchaser,
he would probably be willing. to &C
| cept a second mortgage for the bal
ance. divided into ten annual pay
! ments.
Here is the way it would figure
The first mortgage of $500 given
under the Farm Loan Act would draw
let us say u per cent interest and
would be paid Off on the installment
plan through period OF forty years
$155.95.
| 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
mortgage at 6 per cent would be
$50 the first year and one tenth OF
| the $4,000 would be $3.50.
Adding the interest and the one
tenth annual payment would mean
payment of $400 on the second mort
gage the first year. The second year
paymen. would be 1885 and the fol-
lowing payments through ten years
to retire the second mortgage, both
principal and interest would be
1870, 1855, $40, 1925, 1910, 1926,
$3.50 and $265.
| On top of all these annual pay
ments would be the $155.y5 interest
and amortization payments on the
first mortgage to the. Federal Land
Bank so that the total payments, in
terest and principal, on the two mort
cages would begin at $555.95 and
dwindle down to $4,000 the tenth
year and after that only. $1,000
each year.
If the terms of the second mort
gage could be arranged for longer
than ten years, the required annual
payments would be correspondingly
reduced.
| These annual payments are no
greater than the average tenant pays
for rent. The first year payment on
both these mortgages would amount
to approximately $3.50 an acre.
These would gradually reduce until
the tenth year he would be paying
S4.2O an acre and each year after that
he would be paying only $1.55 per
acre per year. Instead OF being paid
as rental money 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 would prevail I'M
! r. 7 AIT