FARM MORTGAGE LOANS BY BANKS, ETC. 21 



TERM OF LOAN AND METHOD OF REPAYMENT. 



Farm mortgage loans by banks are usually made for relatively 

 short periods of time. Only rarely do such loans run for a period 

 as long as 5 years. Insurance companies make loans as a rule for 

 somewhat longer periods of time. Of 182 insurance companies which 

 gave information on this question, 102 stated that the terms of 

 their loans were not over 5 years; 72 that they loaned for not over 

 10 years; and 6 that they had some loans of more than 10 years 

 maturity. Of 65 mortgage bankers who reported on this question, 

 34 stated that the terms of their loans were not over 5 years; 27 that 

 they were not over 10 years; and 4 that some loans were for more 

 than 10 years. 



On the question of the method of repayment of loans, 177 insurance 

 companies and 61 mortgage bankers reported as follows: Thirty- 

 three insurance companies and 8 mortgage bankers stated that their 

 loans were straight loans to be paid at maturity; 17 insurance 

 companies and 5 mortgage bankers that repayment was optional at 

 any time; 18 insurance companies and 9 mortgage bankers that 

 repayment could be made in whole or in part after specified periods 

 of from 1 to 5 years. Eighty-four insurance companies and 34 

 mortgage bankers stated that payments could be made on the prin- 

 cipal on any interest date, in multiples of from $100 to $500, or one- 

 fifth or one-tenth of the principal in any one year, after the lapse of 

 a certain period varying from 1 to 5 years. Nineteen insurance 

 companies and 1 mortgage banker stated that certain annual pay- 

 ments were required, sometimes specified as $100 to $500, or one- 

 fifth or one-tenth of the loan, while 6 insurance companies and 4 

 mortgage bankers reported using the amortization plan of loans 

 running for 20 to 30 years. 



CONCLUSION. 



While the increase in farm mortgage indebtedness during the last 

 decade, as indicated on the earlier pages of this bulletin, appears 

 almost startling, such increase is not in itself a cause for alarm. 

 It is rather a logical result of increased market value of farms. The 

 increase in these values, in turn, reflects better farm incomes during 

 the decade in question than prevailed during preceding decades, 

 these incomes being to a considerable extent invested in added 

 permanent improvements in the form of buildings, fences, silos, and 

 drainage and irrigation systems. 



A very considerable percentage of farm mortgages are the result of 

 land transfers, the mortgage, like tenancy, forming a rung in the 

 agricultural ladder leading to farm ownership. The size of the 

 mortgage naturally tends to bear a direct relationship to the purchase 

 price of the farm. 



