Toll Bros. offers 3.99% 30-year loans
The home builder is slashing borrowing costs for new buyers in an effort to revive the abysmal market.
NEW YORK (CNNMoney.com) -- One of the nation's largest builders is trying to shock the flatlining new-home market into action with an incentive plan that will slash monthly mortgage payments for qualified buyers.
Luxury homebuilder Toll Brothers Inc., said Wednesday that it will offer buyers of its existing new-home inventory a 30-year, fixed-rate mortgage at an interest rate of 3.99% with no points paid up-front. That contrasts with a rate of 5.59% for the average 30-year, fixed-rate mortgage with 0.3 up-front point, as reported this week by Bankrate.com.
A buyer taking a Toll Brothers mortgage, as opposed to the 30-year rate quoted by Bankrate, could lower their monthly mortgage payments to $1,988 from $2,391, a savings of $403 a month on a $417,000 loan (the maximum mortgage loan that will be bought or guaranteed by Fannie Mae (FNM, Fortune 500) or Freddie Mac (FRE, Fortune 500) in most places).
"The offer is aimed at people waiting for the rates to drop," said Don Salmon, CEO of TBI Mortgage, the Toll subsidiary that will provide the mortgages. "It will be a strong catalyst for potential buyers to get off the fence."
New home sales have been extremely slow. In November, the latest month for which statistics are available, sales of new homes fell to an annualized rate of 407,000, down 2.9% from 419,000 in October and off 35.3% from November 2007.
The Toll Brothers (TOL, Fortune 500) offer is only in effect through Sunday, so buyers will have to act quickly. It's available on homes in 270 Toll communities across 21 states, according to Fred Cooper, Toll's senior VP of financing. He said the program has drawn an immediate response; the phones have been ringing off the hook.
Then, late Thursday, the company sweetened its offer, announcing that the 3.99% rate could also be locked in for as long as nine months. That option is aimed at Toll customers who want to purchase a new, built-to-suit home, rather than existing inventory.