Plain Dirt Financing Financial Information for Amish Farmers Winter 2021
Considerations for a Second Mortgage Katie Moore, Loan Officer
If you’ve ever found yourself facing a large expense, such as a home
addition or remodel, then it’s possible that you’ve considered using
your home’s equity as collateral to secure the funding. Your equity is the value of your home, minus the amounts of any debts for which your home is collateral.
EQUITY = HOME VALUE - DEBT
As such, these loans are often referred to as second mortgages. When
it comes to shopping for a second mortgage, one of the key items to consider is the type of loan that you will need. It is important to understand what the options are and the benefits of each.
The first loan option is a lump-sum loan (sometimes referred to as a
real estate equity loan, or a Home Equity Fixed Mortgage [HEFIX] loan). These loans feature a fixed interest rate as well as a fixed loan term. With
lump-sum loans, you’ll receive the full loan value upon settlement and begin to repay principal and interest immediately. The loan term will determine the number of years that you will need to make payments until the loan is fully repaid. The advantage with this type of loan is the fact that the interest rate is locked in and the loan will be paid-off
The second loan option is a Home Equity Line of Credit (HELOC). Unlike a lump-sum loan, HELOCs feature a variable or floating interest rate,
meaning that the interest rate can change, moving either up or down,
during the life of the loan. A HELOC offers greater flexibility to a borrower by allowing you to borrow less than the full loan value, since you only have to pay interest on the amount that you’ve borrowed.
For example, if the full value of the HELOC is $100,000, but only $5,000 is
being borrowed, you’ll only be paying interest on the $5,000 borrowed.
If no funds are borrowed at any point during the loan term, then no payments have to be made. HELOCs are also revolving, meaning that their funds can be re-advanced during the loan’s term, so any amount that is repaid can be used again, similar to a credit card.
When deciding on a second mortgage there are several things to keep in mind:
• A HELOC will typically be a better option if you are unsure of the amount that you will need to borrow, since you will
not have to pay interest on the full loan value, only what you have borrowed.
• Knowing the amount that you need to borrow will usually make a lump-sum loan the better choice, since
you will know exactly what your payment will be and do not run the risk of having your interest rate increase.
Given that all loans are unique, if you have any questions, give your loan officer or Farm Credit a call to discuss your situation and determine what loan will be best for you.
within the designated loan term.
Winter 2021
Gaining Traction and Vision for the Coming Year: Five Tips to Review Year-end Financials Kelvin Ranck, Loan Officer
With the closing of the calendar year comes the opportunity to look back at the past growing season and your farm business financials.
The year-end brings a good opportunity to update your record books and plan for the New Year. Part of being a good manager is planning. Planning well requires us to analyze the past year and use the numbers and information to plan for the coming year. When we record, examine,
and review the financial information from the year, we are better
positioned to budget and make decisions going forward. This article highlights and explains five ways a farm operation can review, analyze
3. Create or update your budget The farm budget is a powerful tool because through it you can set goals for your farm expenses and income. Budgeting means planning how much you will spend in various farm categories. The budget helps to guide your spending decisions throughout the year. Review the budget to see how well you have stayed on track this past year. It is helpful to
make changes to your budget as prices increase and your farm changes or grows. Maybe you plan to milk more cows or farm more acres this coming year. The updated budget will help you decide how much cash to keep on hand to meet your growing farm needs.
4. Prepare for tax season by tax planning Whether your farm is large or small, it is important to do some tax
planning. Tax planning is evaluating your financial situation and working to ensure that you pay the lowest amount of taxes this coming spring.
Businesses can plan ahead to make the timing of their income and the
timing of their purchases work together to reduce tax expenditures. As you prepare for tax season, ask your tax accountant if there is anything
you can do to prepare for tax season. Let your accountant know if you are planning to make any big farm improvements or equipment purchases.
5. Review farm line of credit use
and plan for their business.
Do you utilize a revolving line of credit? Farmers use a revolving line of
A balance sheet, also referred to as a statement of financial position, is
Before you use your line of credit for a large piece of equipment or
1. Create or update the balance sheet a picture of your farm assets that shows your current financial position. The balance sheet details which of your assets are debts (loans) and
which assets are equity (owned). Your farm equity is the portion of your
credit to help manage their annual operating costs. Lenders encourage
you to use credit lines for short-term expenses such as seed or fertilizer. farm improvement, contact your loan officer to talk about alternative
financing options. We want to help you use your revolving line of credit
in the most effective manner. Fully paying down your line of credit each
Farm Assets = Farm Debts + Farm Equity
year is a requirement of renewing the credit line.
The powerful thing about the balance sheet is it shows you what direction
The five financial planning tools above are important for farm business
are growing. For example: how your inventories have increased or how
like writing a farm narrative to record your farm’s history. The farm
farm assets that you own.
your farm is heading. Preparing the end of year balance sheet every year provides you the ability to see how fast your assets or net worth your loan amount has decreased.
2. Demonstrated through inflation How do you keep track of your farm’s income and expenses? As we reach
year-end, reviewing and recording these items will give you a complete picture of your income and expenses to see which parts of your farm are
most profitable and which are least profitable. Reviewing your income
success to gain traction and vision for the New Year. You may have additional tools and methods that you use to keep track of your business,
narrative can help you build vision for your farm’s future. As you look
back over your farm history or story, what changes would you like to
make for the future? Share your plans or changes with your lender. We are happy to be a part of your planning. Your loan officer can help you know which financing options are available and most helpful for your unique farm operation.
and expenses also helps you manage your cash flow. A farm’s revolving
line of credit can help during the months when your seed and other
operation expenses are greater than your income. Possibly the most exciting part of reviewing income and expenses is how it helps you measure success and your profitability. Have you met your goals for this
year? For every dollar of expenses, how much income have you earned?
Give us a call today at 888.339.3334 if you’d like to discuss your year-end financials in more detail.
Winter 2021-22 Lancaster County Plain Community Pesticide Meetings Coordinated with Penn State Cooperative Extension educators Jeff Graybill & Leon Ressler, all meetings will have two core and two category PA private pesticide applicator credits. To check on your credits, call PA Dept. of Ag. Region 6 at 717-346-3223.
12/21/21
2/8/22
Daniel’s Store:
Martin’s Ag:
324 Glenbrook Rd. Leola, PA 17540 12:30 – 2:30 PM & 7 – 9 PM
338 Grist Mill Rd. New Holland, PA 17557 1 – 3 PM & 7 – 9 PM Fumigation credit: 6 – 7 PM
1/18/22
Lancaster Crop Day, Farm & Home Center:
2/15/22
1383 Arcadia Rd. Lancaster, PA 17601 9 AM – 3 PM $20.00 Register by calling 1-877-345-0691
R&M Nolt:
Green Tree Hardware:
SOLANCO Young Farmers/Penn State:
1342 Georgetown Rd. Quarryville, PA 17566 12:30 – 2:30 PM
Hoffman Building, 172 S. Lime St. Quarryville, PA 17566 1 – 3 PM & 7 – 9 PM $5 at the door
1/20/22
1/27/22
Bird-In-Hand Store:
290 South Shirk Rd. New Holland, PA 17557 1 – 3 PM
2/22/22
2/23/22
2805 Old Philadelphia Pike, Bird In Hand, PA 17505 12:30 – 2:30 PM
A&B Hardware:
Gid King Hardware:
3/31/22
2/2/22 & 2/4/22
5465 Elam Rd. Kinzer, PA 17535 12:30 – 2:30 PM
606 Landisville Rd. Manheim, PA 17545 12:30 – 2:30 PM
Penn State Procrastinators Meeting, Farm & Home Center: 1383 Arcadia Rd. Lancaster, PA 17601 7 – 9 PM. $10 Register by calling 1-877-345-0691 Walk-ins welcome.
Winter 2021
PRESORTED STANDARD U.S. POSTAGE
PAID
COLUMBIA SC PERMIT 1160
15 Eby Chiques Road Mount Joy, PA 17552
we put our profits
directly in your pockets
®
We are now offering ACH Disbursements for Patronage to eligible member-borrowers, to make sure you get your patronage distribution check as quickly as possible. Contact your loan officer, or give us a call at 888.339.3334 during regular business hours, Monday - Friday from 8 a.m. - 4:30 p.m. to sign up for ACH Patronage disbursements. You’ll still receive a letter and a check “stub” in the mail that you can keep for your records, but now you can enjoy your patronage check the same day the payment is issued! No more trips to the post office to check the P.O. Box in time or to the bank to deposit the paper check.
