Zero interest rates offered to put some pep in home building

Still think mortgage interest rates are too high? How about a home loan with 'zilch' interest? While home mortgage interest is down from the hefty 18 to 19 percent range two months ago, the latest device introduced by Los Angeles area builders wipes out the rate factor entirely: loans with zero interest - and a free and clear home in five or seven years.

The zero rate is being promoted by only a handful of builders so far. But chances are the idea will spread in this area and to other parts of the nation in efforts to inject some life into home sales activity.

It comes at a time when price tags of homes in California are going downhill while the United States trend continues upward. Security Pacific National Bank, Los Angeles, tallied the average cost of a new California home dropped to $121, 000 in October from $128,000 in September.

Major attractions of the zero interest plan are less total cost in acquiring the home and owning the home in far less time. Down payments range from 20 to 40 percent of the purchase price with the balance paid off in equal monthly installments over 60 or 84 months.

J. C. C. Enterprises, a Torrance developer, is pricing four-bedroom homes in a planned 125-unit Burbank project from $261,000 to $284,500. With a $261,000 home for example, a one-third down payment of $87,000 would leave a $174,000 balance to be paid off over 60 months at $2,900 a month. (This compares with a traditional 30-year loan with 16 percent interest rate in which monthly payments would be lower, at $2,339, but the total interest would mushroom the home's total cost to $929,351.)

Even a New York Stock Exchange-listed company, Kaufman & Broad, Los Angeles, is getting into the act with zero interest. It is offering its Casablanca homes in Rancho Mirage, near Palm Springs, for one-third down and the balance to be paid in 60 equal monthly installmments. Typical price of $108,990 means a monthly outlay of $1,206.

A bachelor-size condominium is priced from $49,400 at a Daon Corporation project in Encino, where one- and two-bedroom versions also are available with only 20 percent down payment on a seven-year zero-interest loan. Similar conditions prevail at a Daon project in North Hollywood where prices range from