The Influence of Farm Mortgage Loan Terms on Farm Real Estate Values

William McD. Herr

Journal of Agricultural and Applied Economics, 1975, vol. 7, issue 1, 153-158

Abstract: The influence of credit terms on farm real estate values is a subject on which there are divergent views. Some suggest that readily available credit and liberal terms contributed to the strong gain in farm real estate values in recent years. Credit terms frequently cited as contributing to this situation are increases in Federal Land Bank loan limits from 65 percent of normal agricultural value to a maximum of 85 percent of appraised value of real estate and FHA loan participations with up to 100 percent financing. A number of analysts support the view that financing terms affect farmland values. For example, Gale indicates that low equity financing increases effective demand for farmland, Atkinson includes new regulations permitting increased lending by Federal Land Banks as one of the factors causing “recent big increases in land values”, and Francl commenting on the same regulation says, “A farmer with a given amount of investment capital, therefore, can bid more for farmland and still finance the loan under the revised downpayment provisions”.

Date: 1975
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