Get the most home for your money: buy now!

Real Estate Weekly, Feb 18, 1998

You've heard it before Interest rates are at their lowest level in years. So you wonder whether there will be an even better time to refinance or buy a home. The answer is: There's no better time than now.

At Valley National Bank, headquartered in Wayne, NJ, and with 97 offices throughout Northern New Jersey, mortgage volumes are up dramatically - some 300 percent above normal volumes for mortgages and refinancings.

"This is like the week before Christmas, with people trying to get through to their catalog companies reports Al Engel, senior vice president for residential mortgages. "With interest rates at historically low levels, this is a phenomenal refinancing opportunity, as well as the most ideal time to be in the home-buying market."

Engel emphasizes that anyone interested in buying a home should not wait until the popular spring house hunting season, but should be actively looking now.

"It's a matter of supply and demand," Engel says. "First of all, Realtors in our region are reporting short supplies of homes to begin with. And when interest rates are down, there's an even greater demand for homes. That means the price of re-sales and new homes will be pushed even higher in the spring, when more people are looking to buy."

At the same time, people who already own homes are questioning whether they should be refinancing to a lower percentage rate mortgage, prepaying or otherwise paying down their mortgage more quickly by contributing dollars above their monthly payment.

"Adding, say, $50 a month to their mortgage payments to reduce the principal owed may make a 30-year mortgage payment look like it's behaving like a 15-year mortgage, but it isn't," Engel emphasizes. "The consumer isn't realizing the benefits of paying off 'less expensive money' - money borrowed at the lower interest rate that is available with a 15-year fixed rate mortgage, as compared with a 30-year. The bank offers the lower rate on the 15-year in exchange for getting its money back faster."

Engel added that Valley National offers more than two dozen types of mortgages with a total over a hundred variations within those families, including conventional fixed - rate mortgages, adjustable-rate mortgages, FHA, VA and New Jersey Housing Mortgage Finance Agency loans to low- and moderate income and first-time home-buyers. The bank also offers highly competitive mortgage rates, including no-point mortgage loans, and an innovative bi-weekly mortgage that enables customers to save literally tens of thousands of dollars in interest by making a payment every two weeks instead of once a month.

He noted that Valley's interest rates are among the lowest in the area and added that the bank's 15-year fixed rate mortgage with no points is its most popular refinancing product.

"We also are continually making it easier for customers to apply for a mortgage, minimizing the amount of paper-work involved, helping customers fill out needed forms and positioning mortgage marketing representatives in the field to ,respond to consumer inquiries in the branches," Engel said. Additionally, the department is-able to provide fast turnaround on mortgage applications through its automated underwriting system, which bases loan decisions solely on financial and credit histories entered into the computer.

"But even with mortgage rates in the neighborhood of 7 percent, not everyone should necessarily be prepaying," Engel said. "Since they will be paying off their mortgage faster, consumers need to weigh the tax deduction benefits of having a mortgage. Do they want to accelerate the payoff of that tax deduction? For sure, prepaying made sense when mortgage borrowing was expensive, at 12 percent. But at 7 percent, this is cheap borrowing and they might be able to make better use of their money with certain investments. For example, if a borrower has an extra $150 a month to apply to principal reduction, a more attractive application of that money might be to invest in either a new tax-free Roth IRA or a traditional tax-deferred IRA. Putting that $150 a month of pre-tax dollars into a tax-free or tax-deferred investment may make a lot more sense than reducing the balance of a 7 percent tax deductible mortgage."

Consumers wishing to learn more about Valley National Bank's residential mortgages can call the bank toll-free at 1-888-235-4980.