Historically low interest rates still provide financial opportunity.

Although interest rates have now climbed, compared to six months or even a year ago, they are historically still much lower than they have been in several years. These low rates and attractive home prices are combining to provide consumers with several opportunities to gain financial and personal rewards.

WHERE ARE THE BEST HOUSING BARGAINS?

Because houses around $200,000 or less have been the most in demand, the "discount" in this price range has been recently limited to about 10% or less. In addition, price reductions have been greater for homes in the $350,000-plus range, where demand has been relatively low. However, the biggest savings are now on houses between $650,000 and $800,000.

As everyone is probably aware, home prices in certain areas have dropped over the last 18 months, particularly in California. However, even in a tight real estate market, there is opportunity to take advantage of great bargains due to the combination of low rates, low home prices, and a large inventory of homes. This is good news for homeowners who want to trade-up to a larger and/or more expensive home. Even if you have to sell your current home, you could possibly come out ahead by getting a 15% or even 20% savings on a move-up home. You will also be able to enjoy the lifestyle of a larger living space, and/or extra amenities and considerations, such as a more prestigious community or better schools for your children.

Or perhaps you've dreamed of owning a second home, such as a mountain get-away or lakeside retreat. With today's low rates and affordable home prices, the dream of purchasing that second home can now become a reality. Depending on how much equity you have in your current home, it may be possible to use that equity to purchase a second home. For information about the financial benefits of buying and owning a second home, it is best to contact your tax consultant.

TAKE ADVANTAGE OF LOAN PRODUCT VARIETY

Whether you want to trade up to another home, buy a second home, or purchase investment property, the variety of loan products available today can suit your individual situation.

In times of rising interest rates, the 30-year, fixed-rate is still America's most popular loan product, as it provides a good mix of affordability and stability. However, if you have a good income and want to retire debt-free, it may be beneficial to take a look at shorter-term mortgages, such as 15- or 20-year loans. Although the monthly payments may be higher, the loan is paid off in only 15 or 20 years, with substantial time and interest savings.

If you expect to move in a few years but still prefer a fixed payment, a balloon mortgage may be the answer. Balloons are based on a 30-year amortization schedule, and are due in 5 or 7 years.

Although fixed-rate products are the most popular, an adjustable rate mortgage (ARM) can work to your benefit. ARMs are ideal for people who want a low rate to start, but expect their income to rise in the future. ARMs also best benefit those who plan to move within a few years, so they can avoid the possibly higher adjusted rate.

ARMs are tied to financial indicators, such as the One-Year Treasury, LIBOR, 11th District Cost of Funds or Certificate of Deposit indices. Most ARMs have "caps," or limits, either annually or over the life of the loan, or both. The best ARM product is one that has both types of caps, so that any possible rate increases occur gradually. In addition, look for ARMs that have a conversion option, so you have the ability to secure a fixed rate if and when you feel the time is right.

REFINANCING MAY STILL BE REWARDING

Another way to take advantage of today's interest rate environment is to refinance the mortgage on your current or even second home. There are currently about $700 billion in mortgage loans above 9% that are yet to be refinanced. If your current interest rate falls into that category, it may be worthwhile to consult with a mortgage expert to determine if refinancing can be a financial advantage for you.

In addition to the possibility of lowering your monthly payments, depending on your current rate, refinancing is particularly beneficial in today's economic environment to take "cash-out." Using these funds to consolidate your debt may gain you tax advantages, as well as saving you interest.

SHAVE YEARS OFF YOUR LOAN

If your goal is to pay your mortgage off sooner, you may want to consider making extra payments to your principal. How much extra should you pay? An easy formula is to take one month's mortgage amount, and divide it by 12. This is the extra amount you may want to contribute to your mortgage each month. The result is that you will end up making 1/12 of an extra payment each month, or the equivalent of one extra payment per year. This can shave years off of your loan term, and can gain you considerable interest savings.

Today's low interest rates, combined with the currently attractive and affordable housing prices, can provide you with many financial opportunities. By using this environment to your advantage, the prognosis for your financial success can be very favorable.

Greg Lumsden is executive vice president of the Retail division for Countrywide Funding Corporation, the nation's largest mortgage lender and servicer. Founded in 1969, Countrywide is celebrating its 25-year anniversary in 1994. The company is based in Pasadena, California and operates more than 350 branches across the nation.