COLUMN: Carmel Hopkins

We're all interested in interest rates. Everyone wants to borrow money at the best rate possible and nobody wants to spend a lifetime paying off interest.

Here we are, living in the age of some of the lowest interest rates in the history of the United States, and we're crying the blues because they've gone up from less than 5 percent to just over 6 percent.

Get real, folks. Any interest rate of less than double digits is considered benign by the folks in the loan business.

A "new" type of loan in the Las Vegas market is the interest-only loan, which has become very popular, according to Gloria Calderone, an executive with Wells Fargo Home Mortgage.

"The interest-only loan is great, especially for people moving into town who will be in a house for only a little while," Calderone said. "There are so many pluses to it."

Here's how it works: a $200,000 interest-only loan with a 4.75 percent rate and no principal payments due for five years equals a monthly payment of $791, or about $250 a month less than a five-year adjustable-rate mortgage with the same rate.

Rick Ryan, a Wells Fargo Home Mortgage loan officer, said the interest-only loans aren't new, it's just that information about them has not been circulated as it should.

"I've made a lot of these loans recently," Ryan said. "In fact, I'm financing my new home through the interest-only loan."

He pointed out the typical interest-only loan is for 10 years and is renegotiated at the end of that time.

Wells Fargo offers two types of these interest-only loans; one is for homes valued from $200,000 to $500,000 and the other for homes valued from $501,000 to $3 million.

Ryan said the product line is best suited for customers who are:

--Looking for a small down payment;

--Seeking flexibility by making interest-only payments and the option of paying toward the principal any time, without penalty;

--Cash-flow conscious, who are focused on low monthly payments;

--Figure minded, those who are comfortable with the balloon payment (or refinancing) in 10 years, plan to sell the property or anticipate higher future income;

--Value seekers, who are rate conscious, and;

--Fiscally confident, those seeking greater control of finances.

Even though the homeowner is not making scheduled payments toward the principal, equity is being built if the appraised value increases each year.

Simply said, according to Ryan, the interest-only loan usually takes a buyer with savvy. That sentiment was echoed by Andy Stewart, vice president and area sales manager for Countrywide Home Loans.

Stewart said his company has been doing interest-only loans for a long time in California because of the higher prices in that market. However, he said now that interest rates are beginning to inch up, they are becoming more popular in Nevada, particularly in the higher-cost bracket.

The low-interest loan also is perfect for people whose income fluctuates, such as those in sales or casino workers. The base loan stays fixed and affordable and the homeowner is able to throw commissions or tips into the principal.

Interest-only loans are less than prime, based on the total value of the home. In other words, a $3 million loan has a lower ratio than a $200,000 loan.

Stewart emphasized there are several payment flexibility loans that give buyers increased options in monthly mortgage payments.

Once again, the real estate market is anticipating the needs of the buyers. What a concept.

Carmel Hopkins, real estate product manager for the Las Vegas Review-Journal and Las Vegas Sun, can be reached at 380-4574. Her e-mail address is chopkins@ reviewjournal.com. Snail mail is P.O. Box 70, Las Vegas, NV 89125.

Real Estate home