The jumbo mortgages are the mortgages, the loan amount of which goes beyond the conventional limitation of loan amounts. The jumbo mortgages are very popular among the buyers. The jumbo mortgages are mainly useful when the two secondary market lending giants of the USA – Frederick Mac and Fannie Mae are not able to cover the entire amount of a particular loan. The jumbo mortgages are also referred to as the non-conforming loans. The concept of jumbo loans is more suitable to self-employed people than any other individuals. The average rates of interest for the jumbo mortgages are generally higher than the conforming mortgage loans. The rates of interest for the jumbo mortgages also vary with the types of property and the amount of mortgage.
The jumbo mortgage loans are different from the standard loans for some of the factors as follows:
The interest rates are higher in case of the jumbo mortgages
The pay-off periods are longer for jumbo mortgages
In case of the jumbo mortgages, a detailed analysis of the proposed property is carried out
The requirements for minimum down payment for the jumbo mortgages are higher
The lenders are exposed to higher risks in case of the jumbo mortgage loans.
In any case if the jumbo mortgage borrower defaults on the loan, it becomes very difficult for the lending company to sell the high priced luxury residence in full price in order to recover the entire money. This is because the luxury prices are more sensitive to market swings. This is the reason that the jumbo mortgage lenders ask for larger down payments from the borrowers of jumbo loan. Due to the high risk associated with the jumbo loans, the interest rate charged on the jumbo mortgages are also high. Getting a refinancing for the jumbo loans can be very expensive due to the closing cost of the loan.
Last Updated on : 1st July 2013