Even the Smallest of Loans Has a Price

Providing small loans at affordable prices has always been a challenge. The problem is that the cost of originating and servicing a loan is much the same for a small loan as for a large one, but the interest return, based on the loan amount, is smaller on the smaller loan. The obvious remedy, a higher interest rate on the smaller loan, makes it costly and perhaps unaffordable.

The price sheets of lenders in the United States generally show higher first-mortgage rates on smaller loans, with minimum sizes ranging from $50,000 to $75,000.

Who needs a mortgage of less than $50,000? For one, people who live in communities where houses are inexpensive.

“In my town, we need mortgage loans from $5,000 to $30,000, and they just aren’t available. Is there anything that can be done?” a reader wrote.

The town is Winters, Tex., population about 3,000, most of them retirees. There are few jobs anywhere close, and houses sell for less than $60,000.