Evening star., 1926-10-13
THE BUSINESS OF GETTING
AHEAD
Shall You Pay OFF Mortgage?

HOratio Alger, jr., touched the heart
of the youth of the Nation for several
generations with his tales of ruthless
and lean mortgage holders who asked
the daughters of impoverished wild
ows to choose between their honor
and foreclosure of the mortgage or
their homes.
Perhaps now that America has be-
come a nation of investors, with g
changed viewpoint, some new novel
list will come along and depict the
tragic disappOintments of an individu
al who lent on real estate in gpoC
faith and found his borrower slovenly
and backward in the matter of fulfill
ing the terms of his contract.
From the standpoint of the pros
porous householder, it is a real prob
lem whether he should gradually pay
off the mortgage, or keep indefinitely
in debt Unless the individual is suffi
ciently prudent to save and invest
funds which otherwise would be USED
to retire a mortgage, he should by
all means pay off his mortgage as
quickly as he can. And, since the ave
rage individual does not possess par
ticularly strong will power in financial
matters, there are obvious advantages
in the building and loan association
system for the amortization or grad
ual retirement through periodic oblig
atory payments of all mortgages.
Psychological Advantages.
If man owns a house which he
intends to keep for his family perma
nently, there are great psychological
advantages in eventually owning il
free and clear.
-f-I Il
more debatable.
For, in the first place, 1t is easier
to sell a house which carries first
mortgage than one which is free and
clear. If there Is no mortgage, the
new buyer must either pay more cash
than he probably has available t6 ar.
range the transaction or he must &c
to the trouble of negotiating a first
mortgage.
Secondly, even If the owner intends
to hold the house for his own use,
his assets are more liquid and better
diversified perhaps if he retains a
moderate sized mortgage on his build
ing and places the funds which other
wise would have been used to retire
the mortgage into a diversified list
of high grade stocks and bonds. In
cash of emergency, when cash is
quickly needed, it is frequently diff
cult to realize on a house without a
great sacrifice, but securities will al
ways find a ready buyer at the mar
ket price at the exchanges.
Pay OFF Indebtedness.
In summary, if you have an abun-
dance of wealth, pay off your mort
gage and enjoy the spiritual advan-
tagpS of being YOUR own landlord
without any ifs and butts On the
other hand, if it would take all of
your available resources to retire a
mortgage, it would seem better policy
to keep a moderate sized mortgage
rather than to put all your financial
eggs into one basket.
Formerly, first mortgages were re-
garded as more or less permanent.
Now the commercial banking idea
that Indebtedness should gradually be
wiped out is spreading to the real
estate field The newer lenders on
real estate. the first mortgage bond
houses, which, generally speaking
lend far more literally than the old
fashioned institutional lenders, insist
on regular amortization. 1t should be
remembered, however, that after the
owner has financed the period of
greatest rick, which is usually during
the initial years of a real estate en-
terprise, when the loan is heaviest, he
frequently exercises his option to call
or retire the outstanding bonds, in
stead of slowly amortixing them.
After calling the bonds, he then ar
ranges for a smaller loan from life
insurance company or savings bank
at a lower rate of interest.