On Thursday I wrote about Toll Brothers' new promotion: a 3.99% 30-year fixed rate mortgage. The struggling home builder hopes that it will help bring prospective buyers out of the woodwork, but I wasn't so sure it really represented such a great deal for consumers.

Today The Wall Street Journal reports (subscription required) that the low rate "may fall flat" and adds that "Builders face stiff competition from bank-owned properties that are selling for big discounts. More than most builders, Toll has tried to hold its prices and instead focus on other incentives, such as upgrades and lower mortgage rates."

The problem with the Toll Brother low-rate gimmick -- and that's really all it is -- is that it's being used in lieu of lowering the prices.

Here's a rule of thumb: Any financing option that can only be used at one car dealership, home builder or electronics store is just a substitute for a lowered price: a tool that the company knows will generate more publicity than just putting stuff on sale like everyone else.

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The amount of cash you can get depends on your age, the type of reverse mortgage you select, the appraised value of your home, current interest rates, and where you live. In general, the most cash goes to the oldest borrowers living in the homes of greatest value at a time when interest rates are low.


September 01 2013 at 2:48 AM Report abuse rate up rate down Reply