BANKING/FINANCE

The Hammond Co. has come up with what it believes to be a unique loan for home buyers--an adjustable-rate mortgage that does not require payments for 3 months.

The loan is designed to help families meet the extraordinary costs of moving into a home and making improvements, said Thomas T. Hammond, chairman and president of the Newport Beach firm.

The loan, introduced Thursday, would enable some borrowers to use their savings to buy new furniture, appliances or other necessities for the home before the mortgage payments begin, he said.

To be sure, borrowers will eventually pay for the 3-month hiatus in payments. The amount owed is tacked on as principal, and the entire loan is repaid in 29 years, 9 months. The total repayment would be higher than if the loan were paid out normally over 30 years.

But borrowers could be better off in the short run with the feature than without it, said Michael Franklin, Hammond’s executive vice president for loan originations.

Assuming a loan of $100,000 under current interest rates, total payments would average $695 a month over the first year, while payments would average $801 a month with a typical adjustable-rate loan, Franklin said. The $106-a-month savings is realized by dividing nine payments by 12 months.

The estimated $1,270 that would be saved in the first year would be added to the principal, creating a loan of $101,270. The general rule of thumb that borrowers eventually pay three times the loan amount means that a $1,270 savings now will cost $3,810 over the life of the loan.