Home Mortgage Loans Stretched To 40 Years

Ten. Twenty. Thirty. Forty.

No, it’s not that old high school cheer. It’s another decade added to the time homeowners can have to pay off their mortgage.

Stretching mortgage payments over a 40-year period may seem like a suicide mission to some, but it’s one way to buy a home you otherwise couldn’t afford.

Interest rates on 40-year mortgages are lower than on more typical 30-year loans, allowing the buyer to qualify for a larger loan.

On the other hand, the longer payoff means it takes longer to build equity in the home compared with 15- or 30-year mortgages.

A $75,000 loan at a fixed rate of 8 percent would require monthly payments of $550.33 on a 30-year mortgage. The same loan for 40 years would require monthly payments of $521.49.

The difference is so small, it should not be used as the sole factor in going with a 40-year mortgage over a 30-year, Florida banker William Granger said.

Shoppers often settle for homes that are smaller, or have fewer features than the home they really want, which is forcing many to look for alternative ways to stretch their dollars, according to Jack Lloyd, senior vice president and area sales director for Savings of America.

Fidelity cuts some fees

Fidelity Investments is cutting as much as 42 percent from the up-front fees investors pay to buy shares in some of the company’s Advisor mutual funds, which are sold only through brokers. In addition, Fidelity, a unit of FMR Corp., will reduce the Advisor funds’ annual distribution expenses, known as 12b-1 fees, by up to 23 percent.

In the last two years, as the amount invested in mutual funds has grown sharply, industry critics have contended that fund companies have not passed the economies of scale along to investors through lower fees.

The fee changes, which affect seven equity and 10 fixed-income funds, vary according to the class of shares purchased by an investor.

In general, the up-front fee, known as the load, will fall to 3.5 percent from 4.75 percent; for intermediate-term bond funds, however, the load will fall to 2.75 percent. Annual 12b-1 fees on most funds will decline to 0.9 percent of net assets from 1 percent, while on others they will fall to 0.5 percent from 0.65 percent.

Check out check cards

A check card is an enhanced ATM card that allows you to make purchases at many merchants, as well as withdrawing money from automated teller machines.

A couple of days after you make a purchase with a check card, the money is automatically taken out of your checking account and sent to the merchant. By contrast, you might not have to pay for a credit-card purchase for several weeks. But with a check card, there’s no bill at the end of the month: Your bank statement will list the date, place and amount of purchases.

Credit cards provide you with more protection against fraudulent use of a lost or stolen card. If you don’t check your bank statements for two months, a crook could spend everything in your checking account.

Before you use a check card, carefully review all the terms governing its use, including fees.

Boring IPOs recommended

Most new stock offerings today are hot high-tech stocks, but Norman Fosback, editor of New Issues, a Deerfield, Fla., newsletter, is highlighting “two really boring buy recommendations”: Eagle USA Airfreight Inc., which specializes in shipping computers, and MSC Industrial Direct Co., which sells industrial products such as abrasives and cutting tools. Eagle went public Dec. 1, MSC hit the market a week ago.

An older boring stock to consider is General Motors Corp., down more than 20 percent from its high but, says John L. Manley of Smith Barney Inc., “poised for a rebound.”

Caterpillar to turn butterfly

If great minds think alike, the personal finance magazines might be expected to cross paths a good dozen times with their stock picks for the coming year.

But among the 75-odd recommendations from the forecast 1996 issues of Worth, Smart Money, Money and Kiplinger’s, only two stocks appear more than once: Caterpillar and Citicorp.

Caterpillar comes across as a hot ticket in Money, which quotes Laura Harrison, a stock broker at Smith Barney, predicting a 12 percent increase in its profit and a 23 percent gain in its stock price because of cost reductions and share buybacks.

In Kiplinger’s, James Galbreath, an NWQ Investment Management portfolio manager, says that Caterpillar is among his favorite makers of capital goods and that its stock is selling at a very low price-earnings ratio.

The only other stock to pop up twice did so because two of the magazines turned to the same expert - Craig. In Worth, he says fears about late credit-card payments at Citicorp have been overstated.

, DataTimes