When you take out a mortgage, a lending agent provides funds to you and you agree to repay those funds at a constant rate of payment over the term of the loan. You are charged an interest rate for the use of the funds. Your payment is the same each payment period but consist of varying amounts of principle and interest paid. At the end of the loan, all interest and principle has been repaid to the lending agent.
The private mortgage bonds work the same way, but from the club members perspective in the reverse direction. A group of members provide funds in various amounts of not less than $10,000 for a term of 10 years. The interest on the money is 5.5% compounded semi-annually. All the club members that provide funds become the lending agents to the club. The club will pay a constant amount on a semi-annual schedule for 10 years to repay the lending agents. Each payment made to the lending agents will have a portion of the principle and interest, just like a standard mortgage. At the end of the 10 year period (20 payments total), the club will have paid back all the principle and the interest on the amount borrowed.
Because this is a private mortgage bond, the opportunity to invest is limited to club members and their immediate family. This bond issue is not open to the general public.
An illustration of the repayment schedule and split between principle and interest for each payment is attached. This is only and illustration and should not be considered an official representation.