Savannah News-Press • Saturday, March 10,1990
Sign for Loan
ixed rates are stuck above 10
percent and mortgage lend-
ers m major markets are
gearing up attractive single-
adjustable-rate loan packages to
you in for the spring financing
But before you sign up, make sore
yqiTre aware of some of the latest,
coftiy wrinkles in the adjustable-rate
mortgage (ARM) game.
One that's appearing with increas-
ing frequency is the ''rounding up/'
rate-ratcheting technique. It's virtual-
ly;! always disclosed in loan docu-
ments, say mortgage industry under-
writing experts, but rarely noticed by
Here's how it works. Say you de-
cide to go with a local lender whose
published rate is the lowest -83/8
percent, for example, on a one-year
ARM. The closest competitor offers 8
I/I percent In all other respects, the
two loans appear to be identical. They
each use the same one-year Treasury
biH index. They both carry margins of
2.75 points (the margin is added to the
base index rate to arrive at the inter- WILIMNGTON ISLAND PARTNERS: John A. Bailey Jr., left, and Robert L Diamond at model home in CXde Towne
est rate you're charged). Both have
Developers Sitting Pretty
maximum annual rate jumps of 2 per-
centage points, and a lifetime rate
cap of six points.
In this case, however, the lower-
priced 8 3ft percent loan will actually
treat you worse, despite initial ap-
pearances. That's because tucked
away in the loan disclosure boiler-
plate language is a "rounding meth-
od" tirrtmtoiftft that could raise your
Olde Towne Partners Control 300 Acres on Wilmington
rate significantly over time/ and cost homeowners to move up, said Bailey.
you hundreds of dollars a year. By BENJAMIN HEBEBBAND
'When you have 300 acres of developable land, you may have "It currently takes move-up buyers
The 8 3/8 percent loan uses a rate- Business Writer
about one year to sell their (existing)
rounding method that amounts to
Robert L. Diamond and John A. Bailey, some land that is less desirable. Youcan't put a $150,000 home," said Bailey.
-beads-we-win, tails-you-lose. At every
Irate-change anniversary, the lender partners in the Olde Towne Development home on that land,' But Bailey and Diamond are confident
gets to take the index, add on the mar* Corp., are in the enviable position of holding , - Developer Robert L. Diamond that the new breed of entry-level homebuy-
gin, and then "round up to the nearest on to the biggest tract of undeveloped land ers will soon mature and look to move up.
-eighth" of a percent. The 8 172 percent on Wilmington Island. "In the short run it may hurt, but adjust-
"loin documents, by contrast, call for Since acquiring the 300-acre Olde Towne Ultimately, Olde Towne may be more room, wet bars or whirlpool tubs. ments in the market are under way," said
the lender to round the index and property off Perm Waller Road in 1985, the than just one subdivision. "We tried to establish a subdivision that Bailey.
margin sum to the "nearest" eighth. two developers have taken their time in cre- "In the long-term, you may come in here would characterize the traditional Savan- Both Bailey and Diamond believe Olde
ifbe crucfial word "up" is missing. ating a master design plan to to help them and enter another subdivision," said Bailey. nah home style as in Ardsley Park," said Towne's three strongest selling points that
Tjie nearest rounding can go down, in maintain a stake in the explosive Wilming- Whatever the future may hold for Olde Diamond, adding that details such as brick will continue to attract buyers are location,
', the consumer's favor, not simply up, ton Island real estate market. Towne, Bailey and Diamond currently are mantles, crown moldings and bay windows location and location.
;* HI the lender's favor. The preliminary niche the two develop* putting their efforts into completing the sub- substantiate his claim. "The beaches are dose by, we have an
• j-T-At'the first anniversary change, ers decided on was to build a subdivision di- division's second phase. "This is not your low-country style subdi- excellent school in May; Howard Elementa-
the initial advantage of the 8 3/8 per- rectly aimed at the move-up market with The subdivision's 45-home first phase, vision," said Bailey. ry School and we offer the quickest driving
cent loan disappears forever. From homes ranging in price from $119,000 to where construction begun in July 1987, has Amenities so far include two tennis time to the workplace,/ said Diamond, who
ttjen on, the disparity progressively $160,000. been sold out since May 1989. It was then the courts, a basketball court and a playground. attended May Howard
; worsens. How costly can the presence That plan has worked so well in the sub- developers started home construction on the A five-acre lake currently is under construc- Diamond, who femembers when the is-
or absence of the word "up" be to division's first phase that the developers next 37-lot phase. tion. These amenities cost the subdivision's land had only about/200 residents 40 years
1 you? The answer ultimately depends have decided to continue along the same "We weren't really off and running until residents $100 a year. ago rather than the current 17,000 residents,
upon interest rate movements in the lines in the project's second phase. July last year with sales (in the second Diamond said a swimming pool may be said Wilmington Island has become a com-
* Index, and the length of time you re- The success of sales in the community's phase), "said Bailey. added if the homeowners association de- munity that can stana on its own.
I tain the loan. But even on a relatively recently opened second phase will give Dia- Since July, the developers have con- sires. "Wilmington Island is self-sufficient,"
> * short-term basis, the costs can be no- mond and Bailey more than a clue as to how structed 12 homes, of which seven have "This is a family neighborhood," said Di- said Diamond, pointing out that shopping,
liable. to proceed with the entire build-out of Olde been sold so far. amond, noting that most of the residents fit banking and school facilities are all nearby.
I * ' Rounding up to the next eighth, for Towne, which they expect to take another According to Diamond, the pace of exist- the profile of young professionals. Other than touting Olde Towne's Wil-
; k&tance, would allow your lender to five years. ing sales averages about 25 homes a year - "Most residents are between 35 and 45 mington Island location, Diamond stresses
take a rate that would otherwise be But the developers are already hinting at a pace he considers excellent. years old with two children and have previ- that the subdivision's high elevation does:
ifil percent and turn it into a rate of the possibility of including lesser priced "No Savannah subdivision in this price ously owned a home," said Diamond: not mandate flood insurance.
0jB25 percent. Or to take a rate that homes in the $100,000 to $120,000 range in fu- range is doing better," he said. Attracting previous homeowners or the "That and saving the tuition to a private
•fcould be 10.01 percent and knock it ture phases of Olde Towne. The developers offer 14 basic models of move-up market has been influenced by Sa- school (by sending schoolchildren to May
f Vp to 10.125 percent. A rounding up "When you have 300 acres of developable homes, which range in size between 2,000 vannah real estate market conditions that Howard) can save you a lot of money," said
Clause allowing movements to the land, you may have some land that is less square feet and 2,600 square feet. Addition- have created a flood of affordable housing. Diamond.
next-highest onenquarter percent - a desirable. You can't put a $150,000 home on ally, homebuyers can choose from a list of A recent surge of entry-level home con- Ben Fanner Realty handles Olde
less common but more aggressive that land," said Diamond. "It will force us over 30 options, which include items such as struction in the Savannah area may have Towne's home sales, but broker participa-
technique - would cause rate distor- into some compromises." dining room bay windows, a finished bonus slowed the ability of current first-time tion is encouraged.
tions twice as large.
In hard dollars out of pocket, even .-
dee-eighth of a percent mounts up.
Generally speaking, the larger the
; loan, the bigger the hit. Asked to ex-
Some Tips on Weatherstripping: Sash channels
Spring metal strips
; amine a set of actual mortgage docu-
ments indexed to one-year Treasury Blocking Out Cold, Keeping It In Sash stop
In Real Estate
* acfcurities, the mortgage analysis firm March 12, 1990: The Savannah Board of
* of Loantech, Inc., Gaithersburg, Md., Q. My windows are very leaky. They
* fnported the following: waste energy and let dust and noise get in- Realtors will sponsor a Red Cross blood
r*I'For otherwise identical ARMs, a doors. When is the best time to weatherstrip drive at the board office at 7015 Hodgson
* if percent rounding-up clause is like- them and what is the best type of weather- Memorial Dr. from 10 a.m. to 3 p.m. The
-Iy to cost you a net $1,080 extra over a stripping to use? S. F.
A. If you are trying to block the winter
OitYour blood drive will coincide with a "Best Legs"
contest featuring prominent Savannah busi-
~ 14-month holding period on a $200,000
: nfortgage, or $216 a year. The cost is cold, late winter or very early spring is the
best time to weatherstrip your windows, es-
Utility ness men. For information call 354-1513.
-likely to be an extra $540 over the
: holding period on a $100,000 loan, $108 pecially wood. The frame and sash shrink
during the winter and the size is stabilized
Bilk March 22, 1990: Brenda Haren of Union
Planters Mortgage Co. will present a con-
;i;year Double those figures if your Nails Chisel ventional loan seminar from 9:30 a.m. to 1
round-up clause specifies one-quarter now. Don't wait until summer or fall when James Dullev
a percentage point. they have swelled again. p.m. at the office of the Savannah Board of
Should you care about $100-$200 ex- If your main concern is lowering cooling Adhesive-backed foam weatherstripping EASY: Spring metal strips Realtors, 7015 Hodgson Memorial Dr. For
a year or 11,000-plus over 60 costs, wait until late spring or early sum- is the least expensive and simplest to in- information call 354-1513.
* Jtoonths? That's up to you, but a mort- mer. By then the windows will have swelled stall. It is very effective for larger gaps, A tubular vinyl strip comes attached to a
Ifage executive of the Federal Home to their stabilized-summer size. Caulk and however, it is not very durable. You should wood, aluminum, or plastic mounting strip. April 4-6,1990: Georgia Tech will present
"MMin Mortgage Corp. (Freddie Mac) adhesives are also easier to apply in warm only use it on windows that are not frequent- It's designed to mount on the indoor surface a three-day "Elements of Style" seminar.
*jMid investors in home loans "defi- weather ly opened and where it is just compressed of the window frame or sash. When the sash Topics include "Intown and Suburban
. tritely would pay a premium" for the In a typical house, the gaps around all with no sliding friction slides closed, it's slightly compressed. It Homes," April 4; "Interiors," April 5; and
l«£tra rate-yield such loans offer. the old windows can be equivalent to a sev- For frequently-opened windows and ones can be seen on the window frame, however, "Neighborhoods and Communities," April
Package them into securities of hun- eral-square-foot hole through your wall. where the weatherstripping is subject to it's not unattractive 6. For details call Peggy Bel at 356-2390.
•flreds of mortgages, and the extra $10 Weatherstripping windows can easily pay sliding friction, a spring metal strip or tubu- You can write to me at the Savannah
.'46 $20 a month per loan begins to look back the material cost in a month or two. it lar vinyl gasket is best. The spring metal News-Press, 6906 Royalgreen Drive, Cincin- April 11, 1990 Realtor Janice Gantt will
sweet. The executive noted that should make your house more comfortable strip is particularly effective for relatively nati, Ohio, 45244 for UTILITY BILLS UP- present a sates success seminar at the
Mac's own uniform mortgage year-round and reduce dust and outdoor narrow, more-uniform gaps. DATE No. 096 showing a buyer's guide list Coastal Georgia Center for Continuing Edu-
specify roundings to the noise You generally attach the metal spring for seven common types of weatherstrip- cation For times and registration, call
" eighth, not necessarily up There really isn't one best type of weath- strip with small nails in the sash track of ping showing price, durability, resistance to 356-2243
key here is to ask at loan ap- erstripping for all window applications. The the window frame The V-shaped strip is re- compression and friction, and gap uniformi-
nficatiofi what "rounding method" the proper selection depends on how often you cessed, so it can't be seen when the window ty, and diagrams of how to install several April 29-May 5: American Home Week.
open and close each window and whether is closed. Then use a chisel or screwdriver types. Please include $1 and a self-ad- Savannah Mayor John Rousakis has signed
CAM, Page 9C the weatherstripping is just compressed or to bend out the free leg This springs against a proclamation for American Home Week
it must withstand sliding friction. the sash to seal leaks • See TIPS, Page 9C For planned activities, call 354*1513.