Jumbo Loans Boost Luxury Housing

Jumbo mortgages are providing the housing market recovery with a boost, according to industry experts. Buyers looking at luxury properties currently can obtain jumbo mortgages with interest rates that are on par with – and sometimes even lower than – conventional loans.

Moreover, the new qualified mortgage regulations (QM) don’t apply to jumbos, which makes them a more flexible option for buyers who want things like interest-only loans or who have a high net worth but complicated finances.

Jumbo mortgages can make sense for financing a home purchase even when buyers have enough cash, says Denise Andres, a real estate agent with ERA Landmark in Bozeman, Mt., who recently helped a client who downsized with a jumbo loan rather than pay all cash. “His thought was, with the gains in the stock market, why would I want to pay all cash if I can get 30-year money so low?” she says.

Jumbos are luring more buyers into “move-up” purchases, and this, in turn, is freeing up inventory at the lower end of the market.

Source: Reuters (02/11/14) Pinkster, Beth