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Show r Open House . Back to basics in home mortgages By JAMES M. WOODARD Copley Newi Service In recent months there's been a dramatic change in the way home buyers finance their purchases. Consider these contrasts in the evolving market: Nine months ago, fewer than half of all first mortgage loans were fully amortized, fixed-interest-rate instruments. Now, almost al-most eight in 10 are of that traditional type. A year ago, only about 30 percent of first mortgage mort-gage loans were originated by financial institutions. Now, more than 60 percent are provided by such institutions. insti-tutions. A year ago, nearly a quarter of all first mortgages mort-gages involved balloon payments. Now, only 4 per cent involve balloons (short-term loans that become be-come due at maturity in -one lump sum payment). Overall, seller-finance ing and home mortgage assumptions as-sumptions are now used only half as much as they were a year ago. Typically, the home buyer of just a year ago would assume the existing mortgage loan on the purchased pur-chased home, and the seller would carry back a sizable chunk of his equity in the form of another loan secured by a second mortgage mort-gage or trust deed. That second loan usually carried a provision that it would be totally paid off with a balloon bal-loon payment in three to seven years. Today, the typical home financing consists of one institutional mortgage loan a "first" loan with a fixed interest rate and monthly payments. That's quite a contrast with the direction the market mar-ket was taking a couple of years ago. Then, lenders were offering many forms of variable rate and payment pay-ment mortgage loans. In fact, industry leaders were predicting the demise of the fixed-rate loan. In mid-1983, it's back to the simple and basic home mortgage loan. The key reason, of course, is tied to lowering interest rates. A recent report from the National Association of Realtors Re-altors explained it this way: "When home mortgage interest rates soared to 15-16 15-16 percent and even higher during 1980-82, there was a sharp increase in the use of creative financing the so-called people-to-people financing in which ail or part of the home loan amount came from the seller or other non-institutional source. "As interest rates dropped to the current 12-13 12-13 percent range, home buyers increasingly turned back to traditional loan sources, such as savings and loan associations. Since last summer, there has been a significant shift ' , back to the use of first mortgages and less reliance reli-ance on second and third liens." Addressing the now-hollow predictions that fixed-rate fixed-rate home mortgages were a thing of the past, the . NAR report stated, "Clearly, "Clear-ly, the traditional fixed-rate, fixed-rate, fully amortized 30-year 30-year mortgage is not extinct. ex-tinct. "The improving health of the nation's lending institutions, institu-tions, combined with strong consumer demand for these traditional mortgages, mort-gages, is likely to keep home buyer demand for fixed-rate mortgages for many years." Q. How many of today's new homes are being built by their owners? A. A recent report reveals that nearly 20 percent per-cent of this year's new homes are being constructed construct-ed (totally or partially) by their owners who will subsequently sub-sequently reside in the residence. res-idence. This a record proportion, pro-portion, reflecting the growing do-it-yourself trend. Q. What's a good source of information on time-share time-share ownership vacation properties and how they are taxed? A. Probably the best information in-formation on this specialized special-ized subject is a new publication publi-cation produced by the National Na-tional Time Sharing Council of the American Land Development Association. Associ-ation. It's titled, "Timeshare Property Assessment As-sessment and Taxation." It's available through the council (NTC), 604 Solar Building, 1000 16th St. N.W., Washington, D.C. 20036. |