Lord Burleigh's Advice on Making a Loan - Keeping Accounts with Banks - Applying For a Loan - Cringing Applicants Receive Few Financial Favors - Loans From Building and Loan Associations - Executing Mortgage or Trust Deed, and Forms Thereof - Two Short Rules For Computing Interest - Reserving Right to Pay Note Before Maturity - Punctuality In Paying Interest - Selling Mortgaged Property - Particulars Relating to the Execution, Assignment, Partial Release, Full Satisfaction, Foreclosure and Redemption of Mortgages, and to the Execution and Re-Conveyance of Trust Deeds.
Sec. 93. In regard to making a loan, the advice of Lord Burleigh may not be amiss: "Borrow not money of a neighbor, or a friend, but of a stranger, where, paying for it, thou shalt hear no more of it. Otherwise thou shalt eclipse they credit, lose thy freedom, and yet pay as dearly as to another. But in borrowing of money be precious of thy word, for he that hath care of keeping days of payment is lord of another man's purse."
Sec. 94. Every person who is accumulating capital will find it to his advantage to keep an account with some bank. All monies received by him, should be deposited in the bank, and all withdrawals made by means of checks. The bank thus becomes his book-keeper, and he does not run the risk of losing money or of making mistakes in counting it. In opening an account with a bank, it is advisable to have a personal introduction to the cashier from some friend known to the bank officers. This is not necessary, however, if one has a considerable sum of money to deposit, as the money is the best reference. At the time the deposit is made, the depositor should obtain a passbook in which to have his deposits entered up, and a check book, with which to draw checks.
Sec. 95. In real estate deals, where the buyer cannot pay the purchase price in full, in cash, and the seller will not take back a mortgage, it becomes necessary for the buyer to make a loan on the premises. He can obtain the money therefor from a private individual or from a bank. Private parties oftentimes desire a higher rate of interest, and are more difficult to deal with, than is a bank. A national bank is not permitted to make loans on real estate security, so that such loans, when not made with private individuals, must be made with savings banks, State banks or building and loan associations.
Sec. 96. Savings banks and building and loan associations make loans in a systematic manner. The first step for the borrower to take is to sign an application for a loan. (See Forms Nos. 27 and 33.) In a booklet issued by a savings bank, occurs this sentence: "You do the bank a favor when you ask for a loan on good security." The application blank, when filled up by the proposed borrower, will or ought to contain all of the facts which the bank requires to prepare the papers, etc. In an application blank, or a personal interview, the applicant should not fear to tell the whole truth and it should be told in as few words as possible. When the application has been filed, the bank will send its appraiser to value the property and report to the appraisal or loan committee. Real estate loans require more time for investigation than do loans made on certificates of stock, bonds and other collateral securities. The bank officials will advise the applicant when the committee meets and when his application will be passed upon, and will carefully guide the applicant through the necessary steps to perfect the loan, if granted. One of these steps is the execution of a mortgage or deed of trust. In making his application to the officers of the bank, the applicant should do SO in a dignified, business-like way. He who cringes, and pleads for financial favors, creates an unfavorable impression. "The man who cries when he comes to borrow, will cry when asked to pay," said Stephen Girard, one of the early bankers of America.
Sec. 97. The bank makes no charge for appraising the property nor for preparing the mortgage, note, etc. Some banks charge for the acknowledgment; others do not. The applicant must pay for recording the mortgage and for all expenses connected with the loan, and bring down the certificate of title to show the property vested in the borrower, subject to the loan to the bank as a first lien. Some building and loan associations charge an admission fee of $1.00 per share for each $100 borrowed; an appraisal fee for city property of $3.00, and charge for the recording of the papers, and an attorney's fee, where an abstract of title is furnished instead of a certificate of title. Where the property is situate in the country, there must be added the expense incurred by the appraiser in viewing the property.
Sec. 98. Buildings loans are more difficult to obtain than are loans on improved or unimproved property, as there may be occasion for trouble between the contractor and the mechanics, laborers or material men while the building is in process of erection. In applying for such a loan, the borrower must submit to the lender all plans, specifications and bonds of the contractor connected with the building, and, in some cases, building and loan associations require that the appraisal and building committee of such association shall see that the work is properly done and they audit the bills therefor, and see that the proper completion notice is filed when the building is completed. (See also Chapter on Homes and Homesteads.)
Sec. 99. Some banks will not loan on "key lots," (See Sec. 60) nor on houses of less than four rooms, nor on "California" houses. Before buying, it would be well for the intending borrower to ascertain what the rules are, if any, in regard to loans of the bank from which he intends to borrow. Banks usually will not loan over fifty per cent of the value of city improved property, and not over forty per cent of the value of desirable vacant city property; and about $100.00 to $150.00 per acre on country lands worth from $700 to $1000 per acre; the values in each case being fixed by the appraiser of the bank.