18 BULLETIN 968, U. S. DEPARTMENT OE AGRICULTURE. 
ing a Missouri farm at a cost of $15,500 a man who up to that time 
had been a tenant put into the purchase $2,500 of his own money. 
As to the balance of the purchase price he borrowed $6,500 from the 
Federal land bank, and the man from whom he purchased took a 
second mortgage equal in amount to that taken by the Federal land 
bank and on the same terms, both as to interest and as to the size of- 
the semiannual payment. These terms make it possible for this 
former tenant to own the farm clear of all encumbrances in 34| years 
from the time he purchased by making semiannual payments of 
$422.25 until the end of that time, this amount so paid being sufficient 
to pay the interest and amortize the principal of both the first and 
the second mortgages. 
Several purchasers reported that the man from whom they bought 
accepted a second mortgage, pa} T able in full by the end of 20 years, 
interest on any unpaid balance being paid annually, and in addition 
an amount equal to a twentieth of the face of the loan, so as to pay 
off the second mortgage in full by the end of the twentieth year. 
In another case the seller of a farm permitted the buyer to place a 
Federal land-bank loan on the farm, and accepted a second mortgage 
in part payment, due in 20 years, with provision for payments at 
the option of the purchaser up to the end of the twentieth year. In 
such a case the holder of the second mortgage has the assurance that 
his second mortgage is becoming more secure each year, because his 
mortgage is second to a mortgage that is being reduced in amount 
every six months by a payment on the principal. 
The principle of deferring the first annual payment for more 
than one year after the negotiation of the loan is observed in a few 
of the second mortgages subject to periodic repayment. In two 
cases payments begin to come due on the second mortgages not until 
the fifth } T ear, in seven cases in the third year, in five cases in the 
second year. However, most of the mortgages — 228 in all — provide 
for the first payment by the end of the first year after the date of 
the second mortgage. Arrangements for deferred payment such as 
those just described are likely to prove of considerable advantage 
in the case of a purchaser who needs all his available cash during 
the first few years to place the farm on a paying basis. 
RATES OF INTEREST ON SECOND MORTGAGES. 
The interest rates on second mortgages were found to average 6.8 
per cent. The rate for the various Federal land-bank districts is 
shown in figure 5. While the average rate is highest for the Texas 
land-bank district, which comprises the single State of Texas, it is 
considerably higher for several other individual States, for instance, 
Arizona, 10 per cent; New Mexico, 8 per cent ; Arkansas, 8 per cent. 
