Real Estate Record





AND     BUILDERS'    GUIDE.





Vol. XVII.





NEW YORK, SATURDAY, JimE 3, 1876.





No. 429.





Published Weekly by

THE REAL ESTATE RECORD ASSOCIATION

C. W. SWEET...............Pbesident and Tbeasubeb

PRESTON 1. SWEET...........Secbetaet.

L. ISRAELS.....................----Business Managee

TERMS.
OJTE TEAR, ill ad vance.... $10 00.

Communications ahould be addressed to

Nos. 345 AKD 847 Bboadway.





SIX PER CENT. MORTGAGE LOANS.





The reduction of the rate of interest on mort¬
gage loans from 7 per cent, to 6 per cent, is the
interesting and salient feature of the real estate
market during the present season, and it is the
first time in twelve years that this lower rate
has prevailed for any considerable period,
Iu 1864:, when the gold premium reached 290,
capitalists shrank from embarking in ordinary
investments and sought refuge in the security
aflEbrded by real estate loans. Eeal estate, not
having felt the effect of the general inflation,
was still held at such low values that the security
afforded by a 50 per cent, mortgage was ample
for the protection of capital. The great rise
which subsequently took place in landed prop¬
erty increased the risk on mortgage loans, and
the rate consequently advanced to 7 per cent.,
and in many cases a large bonus in the way of
commissions and extra rates was paid for the
use of money; loaned on property. At the pres¬
ent time a great glut of money is again seeking
safe employment, aaid, in order to obtain the best
security that eau be afforded by real estate,
lenders are obliged to offer their money at 6 per
cent., and in some instances as low as 5 per cent.
An examination of the mortgage records shows
that a large proportion of the loans made during
the past three months has been at six per cent.,
the best being placed at this rate, while those
at seven per cent, indicate a much greater risk
in placing money. Upon inquiry at the ofaces of
the principal brokers, we also find that there is a
large amount of capital offering at the lower rate.
In fact, an appUcation now made at seven per
cent, is looked upon with suspicion, and indicates
that a proportion as large as sixty or seventy
percent., and in some cases eighty per cent, of
the present market value is sought to b#pro-
cured by way of mortgage. At present what
are called first-class "gilt edge" mortgage loans
are eagerly sought after at the rate of six'per
cent., a phenomenon of the money market
which suggests iasfenietive comment.

Wonder has been expressed by the daily press
that money has not been heretofore offured at this
rate on real estate loans. The reason simply is,
that the decline in real estate h^s been so slow,
and until lately has been so stubbornly resisted
by various causes, which have been stated
from time to time in The Beoobd, that at no





time since the panic has a loan on real estate
been unaccompanied with the risk of having
to take the property under foreclosure. Cap¬
italists, therefore, have withheld their money
from such investments, preferring to wait
until prices had settled down to a "bed-rock"
and "hard-pan" basis, before putting out
their money for so long a term as is usually
covered by a mortgage engagement. The high
prices of govenmient stocks and other invest¬
ment securities, and the low rate prevailing in
trust companies and upon "call" lo.ins in Wall
street, have at length induced our capitalists to
look elsewhere for the employment of their
funds, and they naturally turn to real estate
securities. The unsettled state of the market
for a long time made the problem of values
a very difficult one; but as these became
settled by foreclosure suits, and by the
process of depreciation and disintegration
that is now going on, the capitalist has
found in the real estate market of New York
the broadest field as well as the most secure
resting-place for his surplus funds.

Capitalisis who are jirepared to lend money
on real estate inspect the risks very nar¬
rowly. Vacant lots are entirely ignored as a
basis for loans, improved property of undoubted
character with reliable income being principally
sought after for these six per cent, loans. For
the time being, the effect of six per cent, loans
must be a depressing one upon the real estate
market, for this very reason that these invest¬
ors gauge values even more closely than do more
liberal and enterprising capitalists who seek
to invest their money by purchase, being de¬
termined to place their funds only in such se¬
curities as will withstand aU future panics
and all further depreciation of values. Those
who buy for cash do so only at a low figure;
those, however, who loan their money are
not contented even with these low valua¬
tions, but desire still lower estimates, in order
to insure themselves unmistakably against loss.
Instead of these six per cent, loans being acci¬
dental or exceptional, we are led to believe, from
our knowledge of the real estate market, that
this rate will be established for some time to
come; and we are confirmed in this view by the
willingness of capitalists to make engagements
for a period of five years at this rate of interest.

It is a fact that has been well known in real
estate, circles for many months that our leading
moneyed institutions have been prepared to lend
money at seven per cent., the institutions bear¬
ing aU the expenses of the loans, such as law¬
yers' fees, commissions and searches. This is ia.
concession to the borrower that has never before
been made in this market. These institutions
being exempt by law from all -taxes upon mort¬
gages,, are better able to lend money at mo^eKite
rates than private individuals, who dread the as¬
sessment of taxation upon their personal securi¬





ties. The bugbear of personal taxes, while it de¬
ters many capitalists fi:om investing in mort¬
gages even at seven per cent., is in point of fact
only a figment of the imagination, because it is
thoroughly understood by the well-informed that
many capitalists by various devices escape taxa¬
tion on their personal property altogether. Of
those who pay taxes on personal estate it is safe
to say that none are assessed for more than one-
tenth of the amount of iiersonal securities which
they h»ld, so that really this matter of taxes
upon mortgages is a mere sham. With the pleth¬
ora and cheapness of money many individual
capitalists, who have heretofore withheld their
funds from investment in real estate mortgages,
wiU be induced to embark in such loans.

The first-class productive property of this city
has borne the brunt of the present panic in a
manner that is unequaled except by Government
securities and a few railroad stocks. We hail
the advent of six per cent, loans as betokening
an ease in the r,eal estate market which may,
sooner or later, lead to increased activity and
widespread building enterprises. The excessive
amount of interest charges and expenses upoil
mortgage loans which have heretofore been
borne by real estate owners are unprecedented
in any class of financial securities, and have
placed them on a par with the wildest schemes
of railroading and mining enterprise. These ex¬
cessive charges could only be justified by the
acknowledged risk which lenders heretofore
have been obliged to sustain in making their in¬
vestments, and these risks have been fully
demonstrated in the disastrous course of prices
which has characterized the real estate market
for the last two years. It is safe to say that any
mortgage made within the past five years on
unproductive property in this city has been
tantamount to the purchase of the fee. Lend,
ers have been engaged during the past two
years—^by foreclosure suits—in taking title to
property on which they had made what they
deemed to be but temporary loans. This course
has imposed heavy burdens upon capitalists,
who had little thought of becoming owners
of land, and has tied np a large amount of
available funds which were intended to be
loaned simply on mortgage at interest. The
process of foreclosure having weeded out
I a great many weak holders of property,
'■ this same property will be brought into the
market now for fresh loans on a new plane of
values, and on this new basis will be eagerly
sought for by the owners of capital for mortgage
investments. The mortgage loan is recognized
in courts and in aU systems of finance as the
highest order of security. The questioii of val„
nation being the only risk, when this is well set¬
tled and established on a reliable and firm basis
the security becomes of the highest order, and
a loan made under such circumstances entitles
\ it to the benefit of the lowest rate of interest.