Bye-Bye, 6.5% Mortgages - financing a home - Brief Article

Kiplinger's Personal Finance Magazine, May, 1999 by Joan Goldwasser

* But you can still get a good deal on a loan this spring.

The chance to finance your home at 6.5% over 30 years melted away as quickly as spring snow. The average rate on a 30-year fixed-rate mortgage shot past 7% in March (then retreated a bit)--but the forecast for the home-buying season is still bright.

Even if rates continue to hover around 7%, as many analysts predict, they're still at levels that haven't been seen since the Nixon years. So whether you're buying a home or want to refinance, don't be afraid to lock in a rate. Some lenders will even reduce your rate if mortgage rates drop within 30 days of your lock-in date.

Alternatives to 30-year loans can still land you a below-7% mortgage. Norwest recently offered 30-year mortgages at 7.25%, but 15-year loans went for 6.75% (both with a 1% origination fee). On a $200,000 loan, the monthly payment over 15 years was $1,770, compared with $1,364 over 30 years. But if you kept each loan full term, the 15-year loan would save you $172,440 in interest.

If you think you'll sell or refinance in a few years, consider a loan that is fixed for five, seven or ten years and then converts to a one-year adjustable-rate loan. When 30-year loans averaged 7.1% in March, for example, Home Finance of America's seven-year rate was 6.625%, with no points.

A thin spread between fixed and adjustable rates makes most one-year ARMs unattractive. But some low teaser rates may be worth a look, such as the 4.25% one-year ARM that Mortgage Access Corp. marketed recently in the Mid Atlantic. The rate is still a bargain after a likely two-point jump the second year. But you'd lose ground after that: The fully indexed rate is currently 7.9%.

LOW LOAN RATES AROUND THE U.S.

Pittsburgh           LENDER

Fixed-rate 30-year   Fidelity
One-year ARM         Bell FS&LA of Bellevue
Home-equity line     Parkvale Savings
Car loan             Three Rivers Bank & Trust

Tampa

Fixed-rate 30-year   First Union National
One-year ARM         First Union National
Home-equity line     AmSouth
Car loan             AmSouth

Omaha

Fixed-rate 30-year   U.S. Bank
One-year ARM         First National Bank of Omaha
Home-equity line     First National Bank of Omaha
Car loan             First National Bank of Omaha

Las Vegas

Fixed-rate 30-year   California Federal
One-year ARM         First Arizona Savings
Home-equity line     California Federal
Car loan             Citibank

San Diego

Fixed-rate 30-year   California Federal
One-year ARM         California Federal
Home-equity line     California Federal
Car loan             California Bank & Trust

Pittsburgh           RATE/DESCRIPTION (INDEX PLUS MARGIN)

Fixed-rate 30-year   6.88%/0 pts.
One-year ARM         5.25%/1 pt. (Treasury index + 2.75)
Home-equity line     6.15%/$5,000-$250,000 (prime + 1.5)
Car loan             7.49%

Tampa
Fixed-rate 30-year   7%/1.75 pts.
One-year ARM         5.5%/1 pt. (Treasury index + 2.75)
Home-equity line     5.99%/$5,000-$1,000,000 (prime + 1.45)
Car loan             8.25%/$50 fee

Omaha
Fixed-rate 30-year   6.88%/1.75 pts.
One-year ARM         5%/1.5 pts. (Treasury index + 2.75)
Home-equity line     5.99%/6 mos., $5,000 minimum (prime + 1)
Car loan             7.75%

Las Vegas
Fixed-rate 30-year   6.63%/3.15 pts.
One-year ARM         5.25%/0 pts. (Treasury index + 2.75)
Home-equity line     5.75%/6 mos., $10,000-$500,000 (prime + 1.25)
Car loan             8.50%

San Diego
Fixed-rate 30-year   6.63%/3.15 pts.
One-year ARM         5.38%/0.75 pt. (Treasury index + 2.75)
Home-equity line     5.75%/6 mos., $10,000-$500,000 (prime + 1.25)
Car loan             6.95%/$60 fee

                     TELEPHONE
Pittsburgh           NUMBER

Fixed-rate 30-year   412-367-3300
One-year ARM         412-734-2700
Home-equity line     412-373-7200
Car loan             800-403-2265

Tampa
Fixed-rate 30-year   800-735-1012
One-year ARM         800-735-1012
Home-equity line     813-226-1100
Car loan             813-226-1100

Omaha
Fixed-rate 30-year   402-371-1001
One-year ARM         402-341-0500
Home-equity line     402-341-0500
Car loan             402-341-0500

Las Vegas
Fixed-rate 30-year   800-225-3334
One-year ARM         602-481-8500
Home-equity line     800-225-3334
Car loan             702-797-4444

San Diego
Fixed-rate 30-year   800-225-3334
One-year ARM         800-225-3334
Home-equity line     800-225-3334
Car loan             800-254-2265

RATE BENCHMARKS (as of March 3): PRIME: 7.75% 11TH DISTRICT COST OF FUNDS INDEX: 4.61% ONE-YEAR TREASURY INDEX: 4.82%

Survey was conducted March 5, Mortgages are limited to a maximum amount of $240,000. Car-loan rates are for 48-month new-car loans of $16,000 with 20% down. For more cities, check www.kiplinger.com; click on "Yields & Rates."