Jumbo Mortgage Interest Rates
Jumbo mortgage interest rates will vary from lender to lender however, surprisingly to most people, they almost always carry higher interest rates than a regular mortgage.
Why is this when the value of the jumbo mortgage is far greater than a conventional loan? It almost doesn’t seem fair that jumbo mortgage interest rates are higher but if we look deeper, we can see why this has to be the case.
If we use the U.S.A as an example, both Fannie Mae and Freddie Mac who are the government affiliated agents who market mortgages in the U.S.A usually do so to investors – However, jumbo wholesale mortgages aren’t as popular as conventional mortgage loans and therefore there is a smaller market there for them!
This means to replace the lacking volume of sales, to make up their profits jumbo mortgage interest rates can be around a quarter of a percent (0.25%) higher than your standard home mortgage loan.
Of course there is a cut off point when a regular mortgage becomes a jumbo mortgage. This varies from time to time. The cap is usually pushed higher in times of property prices booming. These days more and more houses are crossing over to the jumbo mortgage threshold
Tips for avoiding high jumbo mortgage interest rates
Some sneaky (or smart!) buyers can actually avoid the higher interest rates of jumbo mortgage loans if the price of their property is a little higher than the limit for a conventional loan.
Often, lenders may allow two mortgages to be taken out – One for the brunt of the property and a smaller mortgage for the remainder of the value (For example, if the jumbo mortgage rate kicks in at $450k then they will allow a mortgage for $420k and another for $30k), thus avoiding the higher interest rate of a jumbo mortgage.
Although the rate for the mortgage of less value will be higher than normal, it can be paid off in a relatively short period of time and therefore save you tens of thousands in interest!
Pretty smart, eh? Instead of getting higher jumbo mortgage interest rates, you get to save a “jumbo” amount of money!
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