Toll Brothers has resurrected the adjustable-rate mortgage (ARM).
On July 11, it started offering 7/1 ARMs at 3.75% at some of its projects. The rates compare to the company's conforming fixed-rate loans of 4.375%.
It's too early to tell if the new product will get traction among Toll's borrowers, but Donald L. Salmon, president and CEO of Toll's mortgage company TBI Mortgage, suspects it will.
"We think there is a pretty active cohort of buyers who will be attracted to this," he said Wednesday.
It is expected to appeal to those who are expecting to move or refinance in the next seven years including first-time buyers and other borrowers who just want to save money on their loan.
While ARMs have gotten a bad reputation during the downturn, the Toll product, with rates locked for seven years, is actually a fairly conservative product, Salmon said.
"A seven-year fixed, fully amortizing loan is a different animal" from some of the interest-only loans with short fixed time frames that became common during the peak of the market. "We had to make sure that we had the right parameters for our customers. It's fully amortizing, not interest only; the caps are reasonable."
Salmon sees the ARM as just another option for Toll's customers.
"Toll Brothers is all about options when you buy a house," he said. "You can choose upgraded gourmet kitchens, different facades, sun rooms, all sorts of things."