Vol. LV. No. 2398. 
NEW YORK, JANUARY 11, 1896. 
$1.00 PER YEAR. 
BUILDING A HOUSE WITHOUT CAPITAL. 
ARE BUILDING AND LOAN ASSOCIATIONS USEFUL? 
Can the System be Utilized by Farmers ? 
I am not anxious to air my private affairs in print, 
and would never do so unless I thought the airing would 
benefit some one. If, eight years ago, I could have 
had access to the facts and figures I now wish to pre¬ 
sent, I might have saved considerable money. There 
are probably others to-day who need just such in¬ 
formation, and I have, therefore, given exact figures 
with no other motive than a desire to make the story 
clear. 
We began housekeeping in 1888 on a farm. There 
were two mortgages on it for $4,500, which at five per 
cent interest, made an annual interest bill of $325. 
The taxes aver¬ 
aged $70 per 
year. The 
buildings were 
in bad condi¬ 
tion, and we 
spent nearly 
$100 each year 
for repairs. We 
finally sold the 
farm and 
moved to a 
smaller place 
where we paid 
$20 a month 
rent, and after 
a time to a still 
smaller place 
where the rent 
was $15. In the 
fall of 1894, in 
figuring up my 
accounts, I was 
astonished to 
find that we 
had spent in 
mortgage in¬ 
terest, rent, 
taxes and re¬ 
pairs, the sum 
of $1,853, for 
which we had 
absolutely 
nothing left to 
show. We had 
lived plainly, 
and in quarters 
that were bare¬ 
ly comfortable, 
yet had paid 
nearly $2,000 in 
cash to others 
for shelter. My 
wife insisted 
that we might 
have joined a building and loan association, built a 
house, and with this same amount of money, become 
our own landlords—in other words, that we might 
have spent the $2,000, and still possess it! This 
seemed to me an incredible statement, but events 
have proved that it was nearly true. 
About this time, I invested a few hundred dollars 
in a building lot. I bought land in a part of the 
town where property was likely to increase in value. 
Not being able to pay for it all, I gave a mortgage 
for $300. The local building and loan association 
about this time issued a new series of shares, and I 
subscribed for 16 of them, for which I was to pay $1 
per month for each share. I bought these shares as 
an investment, as I expected to be able to save that 
amount of money without trouble, and so far as I 
could see, the association paid better interest than a 
savings bank. After studying the constitution of this 
association and observing its workings, I saw that by 
adding to my monthly payments of $16, the money I 
was then paying for rent, I could, in time, own a 
house—that is, 1 would be my own landlord. 
It may be necessary to explain in a few words, the 
principles on which this association is conducted. It 
is a mutual, cooperative affair. A share of stock rep¬ 
resents $200, which is to be paid in 200 months at the 
rate of $1 each month. At any time the holder of a 
share can give good security, he may borrow $200 on 
each share he holds, and must pay for it six per cent 
interest or $1 more each month. He must also pay a 
premium for the use of the money to start with. Let 
us say that 500 shares are taken. That means that 
$500 is paid in each month. As this money accumu¬ 
lates, it is loaned to members, and the interest and 
premiums increase the amount to be loaned ; so that 
the surplus increases at compound interest, and is 
credited at regular intervals to the shareholders— 
each share drawing its proportion of these profits. 
In this way, a shareholder who borrows money, not 
only pays interest, but draws it, too, so that the 
actual interest paid out is very small. 
To make it plainer, let me tell just what I did. I 
went to the regular meeting of the association, and 
found that there was quite a surplus to be lent. The 
president called for bids for the money—that is, the 
one who was willing to pay the highest premium 
could have first choice. Starting at three per cent; 
this was run up to 53£ per cent, at which figure I 
agreed to borrow $3,200, or $200 for each of my 16 
shares. The 5 \ per cent made $168, which was de¬ 
ducted from the principal, so that all I received was 
$3,032. By a rule of the association, a borrower must 
own a lot to start with, and build a house on it so that 
the loan will not exceed 80 per cent of the value of 
house and lot combined. My lot was already mort¬ 
gaged, but the holder of this mortgage agreed to 
accept a second mortgage and let the building and 
loan people have a first. They accepted $800 as a low 
valuation for the lot, and I agreed to build a house 
worth, at least, $3,200, and give them a mortgage on 
the whole property for the face of the loan. We 
obtained plans and specifications from a builder, and 
these were accepted by the building committee, which 
consisted of an insurance agent and old builder, and 
other experi- 
enced men. 
After that, we 
had noth : .ng 
more to do ex¬ 
cept to look 
over the work 
at intervals and 
accept it. The 
builder ob¬ 
tained his 
money from the 
building and 
loan treasurer 
on a certificate 
signed by the 
building com¬ 
mittee and my¬ 
self. Four dif- 
ferent pay¬ 
ments were 
made, and we 
obtained a very 
satisfactory 
house. 
On May 1, we 
moved in. Up 
to that date, we 
had paid $1,973 
for shelter, 
with not a stick 
left standing to 
show for it. 
From the date 
o f borrowing 
the money, I 
have paid $32 
each month— 
$16 of the in¬ 
vestment on my 
16 shares and 
$16 more inter¬ 
est. The profits 
on my 16 shares 
are almost 
large enough to pay me five per cent on their face 
value before they mature, so that almost the whole of 
my $32 is applied to paying for my house. I both pay 
and receive interest on $3,200. In less than 10 years, 
at my present rate of payments, I shall own the house, 
or I can pay any part or all of it at any time after 30 
days’ notice. For each $200 I pay, the monthly pay¬ 
ments are reduced $2. For example, suppose I were 
to pay $400 That would take up two full shares, and 
my monthly payments thereafter would be $38, or, if 
I wish to do so after several years, I can find some one 
to buy the mortgage from the association, and place 
it, say, for five years at five per cent. In that case, I 
can sell out my shares for what I have paid on them 
and their profits, and reduce the mortgage to that ex¬ 
tent In view of these facts, I feel justified in saying 1 
