ultimately represent a considerable saving to the mortgagor, is that which is given under the building and loan association plan. Building and loan associations originated in England. Probably the first one organized in the United States was organized in Brooklyn, New York, in 1836.

The building and loan association is distinctly a mutual proposition. He who borrows from the association becomes a member of the association, and the purpose of the association is to create an available fund which may be loaned to the borrowing members. The members of a building and loan association become such by acquiring and holding the stock of the association. The members are entitled to receive the par value of their stock on its maturity, to make withdrawals, and to receive loans. Ordinarily, the stock is issued at the time of the subscription and is paid for by periodic instalment payments until such time as the amounts paid, together with the additions thereto in the shape of interest, fines, and the like, equal the face value of the stock. Ordinarily, also, a member of such an association can withdraw upon making payment to the association of his indebtedness to it. One who holds membership in a building and loan association has the right, by

virtue of his membership, to receive in most cases a loan up to the amount of the par value of his stock, upon giving proper security to the association.

While the laws governing building and loan associations differ materially in different states, the member will probably be called upon to pledge his stock as security and to give a mortgage on the real property for the same purpose. This mortgage is usually a first mortgage, although some of the statutes allow these associations to take second mortgages under certain conditions.

Building and loan associations enjoy many advantages and immunities by law. The profits from interest and the premiums on loans to members and the like are allowed to accumulate and, under the mutual plan pursuant to which they operate, are held for the ultimate benefit of the shareholders. The result of a mortgage under this plan is, therefore, that the home owner, by periodic payments, not only takes care of the interest due on his mortgage, but, through the amounts credited to him on account of principal as well as interest, cuts down gradually the principal of the mortgage until ultimately it is paid in full. Where, in the case of the ordinary mortgage, therefore, the mortgagor on the

maturity of the mortgage is called upon to pay the full amount thereof, under the building and loan plan, on the same date, he will have reduced materially the principal of the mortgage, and will be able to continue to carry it in a constantly reduced amount until it has been entirely liquidated.

If a building and loan mortgage is not taken, or a purchase money mortgage secured, the mortgage funds must be secured from some individual or institution. Usually, in every locality, there are a number of individuals who make it a practice to lend money on proper mortgage security. Whether this will be an advantageous arrangement for the home builder will depend very largely on the personality and character of the lender. If the latter is one whom the home builder knows well and who will naturally take a friendly interest in the proceedings, aside from the business aspects of them, the borrower will be in safe hands and will probably have no difficulties in arranging for a renewal of the mortgage in a reduced amount on maturity, if that should be necessary.

As a rule, the better plan, however, is to secure a mortgage from some corporation. An individual holder of the mortgage may die and the mortgage pass into unfriendly hands.

Also, and as a general proposition, it is usually easier and more satisfactory to have a business dealing of this character with a corporation whose business it is to engage in such transactions, rather than with a friend or acquaintance. In this way, friendship and business are not intermingled and the transaction is placed entirely upon a business basis.

There are many mortgage companies whose business it is to lend money on mortgage and to make their profits by the resale of these mortgages to their customers and, in many instances, by guaranteeing to their customers the payment of the mortgages, both as to interest and principal, but at a somewhat less rate of interest. For example, a corporation engaged in this business will take the mortgage from the home builder at 6 per cent., and will guarantee it to the one who purchases it at 52 per cent., retaining the one half per cent. as its profit and compensation for the guarantee and for attending to the collection of the amounts due, the payment of the insurance and taxes and the like.

Trust companies have long had the power to make loans on real estate and, more recently, this same privilege has been extended to national banks. At the present time, most national banks conduct a trust department under a spe

cial trust officer and make loans on bond and

mortgage.

Which plan will prove the most advantageous in a given case will depend, of course, on all of the circumstances which characterize it. Usually, the building and loan mortgage will be found, in the long run, to be the most advantageous. It is especially helpful in the case of those whose means are rather limited. It enables them to take care of the amounts due by small periodic payments out of earnings and thus, in effect, to finance the operation on the instalment plan.

I have already pointed out in another connection that, if a mortgage be given, it is advisable to insert in it a provision that payments in reduction of the principal may be made on any interest date prior to maturity. This will enable the owner to apply any cash which he may have in hand from time to time to the reduction of the mortgage, without waiting until the latter matures. If this provision is not inserted in the mortgage originally the holder of the mortgage will often be unwilling to extend this privilege. He may be receiving a higher rate of interest under the mortgage than, under financial conditions as they then exist, he can otherwise secure.