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BETTEZ2 HOMES EDITION Explanation of Part 1 of Dominion of Canada National Housing Act Beloy, will be found a detailed exâ€" planation of the National Housing Act, as furnished by the National Housing Aét branch of the Dept. of Finance at Ottawa :â€" Many families, perhaps most famâ€" ilies, hope that some day they will own a home of their own. They desire a home built to their own individuail needs with modern conveniences that they may have been forced to forego in their present abodeâ€"those little things that make the difference between a house and a home. The purpose of Part I of the National Housing Act is to make this wish come true. This means in effect that the comâ€" plete facilitiee of Part I are now directed to the assistance of families of low and modest incomes who desire «o own homes of their own. How Accomplished Part I of the National Housing Act endeavours to make it possible to achieve this ideal by providing generâ€" ous financing at reasonable interest rates and by establishing a plan for modeate monthly instalments for inâ€" terest, principle repayment and taxes whicin in most cases, should be less than the monthly rental now paid. This plan of financing involveés a first mortgage loan which in the norâ€" mal case may be for any amount from 70 per cant to 80 per cent of the lendâ€" ing value of the completed property. (The lending value of a completed proâ€" perty is either the cost of construction or the appraised value, whichever amount is the lesser. The cost of conâ€" struction includes the cost of the land, the cost of the building, legal an‘* other actual expenses, architect‘s fees and the oost of all permanent improveâ€" ments to the property. While the war effort now constitutes a heavy drain upon the resources of the Dominion, it has been decided, nevertheless, that in view of the seriâ€" ous shortage of houses the loan facilâ€" ities provided by Part I of the Act should be continued for certain classes of houses Whereas in the original legislation either single family, two family or multiple family houses were eligible to be financed, loans are now limited, under regulations issued Deâ€" cember 5th, 1939, to the financing of single family houses of low and modâ€" erate cost. The maximum loan which may be granted to finance any house is $4.000. The fact that the prospective home owner may secure from 70 per cent to 80 per cent of the lending value of the completed property should make it unnecessary to secure any additional funds by second mortgage financing. Second morbgage money is always costly and, under present conditions, is almost impossible to secure. The mortgage, moreover, runs for a long term of years and bears a low rate of interest. These desirable objectives are accomplished by the Dominion Government entering into agreements with approved lending institutions whereby the Covernment makes an advance, at a very low rate of interest, for an amount equal to oneâ€"fourth of the amount of the total loan. In practit¢e, since the maximum loan is now $4,000, the highest "lending value" which may be financed by an 8¢ per cent loan is $5,000, and in the case of a 70 pér cent loan, $5.714. the oase of a single family dwelling where %mmdoumtem ceed $2 the first mortgage loan may be for an amount from as low as 50 per cent to as high as 90 per cent of house is being built for occupancy by the borrower himself and, not for sale or rent. Fuamilies, therefore, of low incomes who desire to own homes of a value of $2,500 or less may be enabled to do so if the family is able to proâ€" The plan is even more generous in case of very low cost homes. Thus in Purpose of the Act. How the Purpose May be Accomâ€" plisked. Requirements. How Mortgage Loan May be Secured. Terms. Methods of Repayment. How to Proceed Under the Act. In other words, the plan makes posâ€" sible a mortgage loan for a high proâ€" portion of the total cost or value of the completed property, a low rate of interest, and the privilege of monthly repayments spread over a long term of vears. vide an amount equal to 10 per cent of the completed property. Approval lending institutions are given special inducements to make such loans by a generous guarantee from the Dominâ€" ion Government. Requirements In order to be eligible to borrow under Part I of the National Housing Act, the prospective home owner must have the required amount of "equity." That is to say. he must be able to make an investment from his own resources equal to the difference between the cost of the new house and the proâ€" eseds of the mortgage loxn. This equity may be in the form of availâ€" able cash or a building lot, or both. In addition to this, if his application is to be considered favourably by an approved lending institution, the borâ€" rower must have a reputation for meeting his obligations promptly and be reasonably assured of sufficient inâ€" come to meet his monthly payments for interest, principal and taxes. The house which he proposes to build must also comply with minimum standards of construction, formulated by the Minister of Finance, which are deâ€" signed to assure the erection of a sound and durable houss, and the location should be such as to give reasonable protection against undue depreciation in property values. Who May Obtain a Mortgage Loan Mortgage loans under Part I of the National Housing Act may be made only to assist in the construction of a new house. They are not available to finance alterations, repairs or improveâ€" ments to houses already built. nor can they be used to refinance old mortâ€" gages on existing properties. Under the Home Improvement Loans Guarâ€" antee Act, 1937, loans may be secured through‘ chartered banks and other approved lending institutions to finance repairs or fnprovements to existing houses. A house to be financed by a loan under Part I of the National Housing Aot must now be a single family dwelling, built solely for the purpose of human habitation. In other words, loans cannot be made for a duplex or apartment house, for stores or other apmmercial projects, or for a house which includes a dwelling place and a store or other commercial project. However, the house may have an atâ€" tached or detached garage. Loans may be made to two classes of owners:â€" (a) An owner building a house for his own occupancy. (b) An owner building a house for sale. In the case of class (b) 25 per cent of the amount of the loan will be withâ€" held until the house is sold under conâ€" ditions satisfactory to the approved lepging institution. per cent equity, or the lending instiâ€" tution may not be wilting to share in a mortgage loan for an gmount as high as 80 per cent for reasons connected with the location or the character of the property. Provision is, therefore, made for loans for an amount rangâ€" ing from 70 per cent to 80 per cent of the lending value. As an inducement to the lending institution to make the higher percentage loans wherever they may be needed, special guarantees are provided \y the Dominion. The borâ€" Terms of Mortgage As already indicated, mortgage loans will be made in the normal case on the basis of 80 per cent of the lending valus of the completed property. In some eases the owner may be able and willing to provide more than 20 rower‘s squity will range from 20 per ‘THE PORCUPINE ADVANCE, TIMMINS, ONTARIO Reference has already been made to the fact that where ‘the lending value does not exceed $2,500 the first mortâ€" gage loan may be for an amount from 50 per cent to 90 per cent d such lending value. Accordingly, the borâ€" rower‘s equity in such cases might be for an amount from 10 per cent to 50 per cent of the lending value. An equity as low as 10 per cent is perâ€" mitted in order to enable persons in the low income groups to finance the erection of a modest home, even though they may not have already accumulated any large amount of perâ€" sonal savings. There will, however, be other cases in this group where a substantially larger equity can be proâ€" vided, either because the borrower has already secured a part or all of the necessary materials for building his home as well as a lot or because he may be able to build all or a substanâ€" tialâ€" proportion of the house by his own labour. The mortgage is drawn for a term of ten years but provision is made for a renewal of the mortgage for a further period of ten years, subject to revaluaâ€" tion of the security and on conditions mutually agreed upon at the time of renewal. The rate of interest payable on the mortgage is 5 per cent per annum. This rate which applies in all cases, no matter what percentage the mortâ€" gage loan bears to the lending value of the property, is a very reasonable one and is made possible by the very low rate which is required on the porâ€" tion of the loan advanced by the Doâ€" minion Government. It compares faâ€" vourably with interest rates charged on similar security. in the United States and in Great Britain. Method of Repayment One of the gr#atest advantages of mortgage loans obtained under Part I of the National Housing Act is the privilege of using the monthly instalâ€" mert plan. The mortgage provides for monthly payments to cover the inâ€" tarest on the loan, repayment of prinâ€" cipal and the estimated annual taxes on the property. The retirement of principal is provided for in accordance with a standard amortization table at a rate sufficient, in the normal case, to retire the full amount of the loan in 20 years. If, however, the borrower so desires, he may arrange for a higher payment in order to retire his loan more quickly., say, in ten or fifteen years. Also at any time after three years he may pay off his mortgage in full upon payment of a bonus equal to three months‘ interest on the amount of the loan then outstanding. The monthly payment for interest is slightly less than 1â€"12 of the annual interest charge inasmuch as the botrâ€" rower is entitltd to be credited with interest on every monthly payment he makes. The monthly payment for taxes is 1â€"12 of the estimated annual taxes. cent to 30 per cent depending upon the percentage which ‘the approved first mortgage loan bears to the lendâ€" ing value of the completed property. An illustration will make clear the working of the monthly instalment plan. On a property costing, or apâ€" praised, when completed, $2,750, an 80 peéer cent mortgage would involve a loan of $3,000. The equity which the borrower would have to put in, either in the form of a lot, or cash, or both. would, therefore, be $750. The borâ€" rower in this case would have to make monthly payments of $19.62 (excluding taxes, which will vary with the parâ€" ticular community in which the house is located); and by the end of twenty years if he kept up his payments regularly he would awn his property free and clear. At the end of ten years his loan would have been paid down to $1,858.84 and at the end of fifteen years to $1,042.M4. By adding to the monthly instalment of $19.62 for interest and principal referred to above, 1â€"12 of the normal annual taxes on a $3,750 proâ€" perty in his own community, the readâ€" er will be able to calculate the total monthly instalment which should be required for an 80 per cent loan on such a property and should be able to determine for himsel{f how closely this compares with the rent which he would have to pay in the same comâ€" munity for similar accommodation. If he desires to determine the correâ€" sponding monthly payment for any other size of loan, all he needs to do is to calculate the monthly instalment for interest and principal on the basis of $6.54 for each thousand dollars of loan and to add 1â€"12 of the amount required for taxes. The monthly payâ€" ments are planned to commerce after the house is compelted. The ad‘vantagerf t_h'}s monthly inâ€" stalment iglagt {will ie reafifly (@ppar; ent. It enables the borrower to budgst his income, ang‘; to set ‘aside s each month a fixed amount to protect his most precious investment, his homeâ€" and the amount should not be beyond his capacity to pay with reasonable comfort. ‘The plan, therefore, is free from the difficulties which are present with straight mortgage loans, where quite large payments for interest and for taxes have to be made on two or three dates during the year. When such heavy payments come due, it is frequently found that the money with which to meet them is not available. The plan moreover is cheaper than any straight mortgage plan; it saves freâ€" quent renewal fees and the monthly retirement of a stipulated proportion of the principal amount of the loan means in effect that the borrower is investing that amount of savings at 5 per cent, compounded monthly. Thess are all advantages secured by the borâ€" rower. To the lender the plan involves more bookâ€"keeping cost but this adâ€" ditional cost is likely to be far more than outweighed by the increased safety of the investment. Minimum Standards of Construction Plans and specifications for the new house to be financed under Part I of the ;&ct are required to be submitted with any application for a loan. The Minister of Finance, under authority of the Act, has issued Minimum Standards of Construction which lay down Minimum requirements to which plans for all houses must conform beâ€" fore an application for a loan will be approved. He has also issued Memorâ€" andum Specifications which make it easy for the prospective homeâ€"owner to decide upon the type of materials and the method of construction which will give him the best value for the investment he wishes to make, and which also makes it possible for the architect or builder to comply readily with the requirement that specificaâ€" tions must be submitted with any apâ€" plication for a loan. If the house is constructed according to these Standâ€" ards and the Memorandum Specificaâ€" tions, the owner should have a wellâ€" built house. The lending institutions have agreed, in order to protect their own interests and that of the Government, to make several inspections of the house during construction, thus providing a further safeguard against faulty construction and poor workmanship. It should be noted, however, that the inspection by the lending institutions is to protect the security of the mortgage only, and in no sense does this inspection relieve the owner of his obligation to see that the plans and specifications are comâ€" plied with and that the house is comâ€" pleted as security for the loan accordâ€" ing to the requirements of the Naâ€" tional HMHousing Act. How to Proceed If you wish to secure a loan in order to build a house under Part I of the National Housing Act, you should write to or apply personally to an approved lending institution. Give all details as to what type of house you propose to build and, if you already own a lot, the location of such lot. If you do nct own a building lot, you would be well advised to consult an approved rending institution before purchasing a lot. You should also give the lendâ€" ing institution information about yourâ€" self which will indicate to the lending instituton your ability to repay the loan. If this information is satisfacâ€" tory, the lending institution will send you application forms and complete instructions regarding the plans, speâ€" cifications, and other documents reâ€" quired. 5 Progress Advances As a loan is made to assist in the construction of a new house, the proâ€" ceeds wil} be advanced as construction proceeds. Therefore, at certain periods, in accordance with the usual practice of the lending institutions, a <proporâ€" tion of the proceeds will be advanced, upon the recommendation of the lendâ€" ing company‘s own inspector. It should of course be understood that the borrower must contribute his agreed equity before any moneys are advanced undér the mortgage. An Example It has already been shown that in the case of a house which has a lendâ€" (Continued on Next Page) her es ‘THURSDAY, MAY 29TH, 1941