NEW YORK — Toll Brothers is bringing back the adjustable-rate mortgage: The luxury home builder said Friday it is offering a 7/1 ARM for 3.75 percent.
The deal for contracts signed on or after Saturday is available for loans of less than $417,000 — the majority of the company’s buyers — in many communities nationwide. It is a special that comes as ailing builders report increased traffic, but it is unclear if this will bring jittery consumers to the closing table as unemployment and foreclosures mount.
Meanwhile, the builder said it isn’t worried about the reputation that ARMs have gotten because this rate won’t quickly reset with crippling or unexpectedly high payments. After the seven-year rate lock, the loan’s lifetime cap is 8.75 percent — well above industry averages for 30-year fixed rates that are currently above 5 percent.
Given that many owners stay in a home for just a few years, “some buyers may choose not to pay that 30-year premium,” said Don Salmon, chief executive of TBI Mortgage Co., Toll’s mortgage subsidiary. “I think this is a viable product for many consumers.”
For those staying in the house for seven years, it’s a great deal, said Joe Snider, vice president and senior credit officer with Moody’s Investors Service.
Should the buyer desire a 30-year fixed-rate loan, that is 4.375 percent. A true jumbo loan could get a 7/1 ARM at 4.75 percent. The fixed rate for loans above $417,000 but below $729,000 is 4.5 percent. There are no points for consumers. Dow Jones Newswires
