The Topeka state journal. [volume] (Topeka, Kansas) 1892-1980, 1917-01-20
Can Swing Entire Proposition
Without Large Cash Basis.
HALF UNDER End MORTGAGE
Can Borrow $500 From Govt
on a $4,000 Property.
Two Mortgages Would Aggre-
gate $685. Payment a Year.
BY FRANK r. WILSON.

OF the Federal Farm Loan Bureau
Written for the Topeka State journal
Washington, Jan. 2O.-The question
has been frequently asked, How can
a renter who has not saved 80 per
cent of the purchase price OF laho
make use of the Federal Farm Loan
Act to get land of his own
The answer is, by means OF IIIst
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 10 the
former owner of the land or 10 d
bank or private money lender, for the
balance.
It must be borne in mind that the
amount which can be borrowed un-
der the Farm Loan Act is limited 10
so 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 &C
tually worth, or, in other words, us
appraised value as contemplated un-
der the Farm Loan Act
To furnish a concrete example:
Suppose John Smith, a renter, wants
to buy 100 acres of land, valued at
$50 an acre. The total purchase price
would be $4,000, but John Smith has
not the money to buy it.
Second Mortgage to Run 10 Years.
L
would be entitled to borrow $4,000 of
the appraised value, if this appraised
value should be the same as the pur-
chase price. This would leave $4,000
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 and sec
ond mortgage executed for the differ
ence.
The original owner would thus get
icfa or ma
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 out:
The first mortgage of $500 given
under the farm loan act would draw.
let us say, Y per cent interest and
would be paid off on the installment
plan thru period of forty years by
making annual payments of $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
$4,000 mortgage at per cent would
be $3.50 the first year and one tenth
of the 50, 500 would be $3.50.
Adding the interest and the one
tenth annual payment would mean a
payment of $500 on the second mort
gage the, first year.
Payments Less Each Year.
The second year payment would be
1886 and the following payments thru
the ten years to retire the second
mortgage, both principal and interest
would be 1870. 1855. $34O, 1925. $40
$295, $3.50 and $265.
on top of all these annual pay
ments would be the $15595 Interest
and amortization payments on the
first mortgage to the federal land banI
so that the total payments, interes
and principal, on the two mortgage.
would begin at $555.95 and dwindI,
down to $420.95 the tenth year anC
after that only $155.95 each year.
If the terms of the second mortgag,
could be arranged for longer than tel
years the required annual payment
would be correspondence reduced
These payments are no greater thai
the average tenant pays for rent TIL
first year payment on both of thes
mortgages would amount to approx
mately $3.50 an acre. These woul,
gradually reduce until the tenth yea
he would be paying $4.2O an acre an,
each year after that he would be nav
ing only $1.55 per acre per year In
stead of being paid as rental this mon
ey is applied on the purchase price q
the land.
The interest rates quoted in this in
stance are suggestions only and ar
not to be taken as an official state
ment of what rates will prevail unde
the farm loan act.
Editors Note-The next install
ment will have to do with the socia
and economic effect of the farm loa-
act.