While most jumbo 30 year fixed rates are currently at about 7.5% today, there are still legitimate options available in the low 5’s. There is a 5/1 jumbo ARM (Adjustable Rate Mortgage) that can be done in the low 5’s. The 5/1 ARM has a start rate in the low 5’s and is fixed for the first 5 years of the loan. After that, the interest rate adjusts annually starting with the 6th year. The payment is based on a 30 year loan term. On a $600,000 loan amount, that can save over $900 each month in the payment for the first full 5 years, vs. what the 30 year fixed payment would be. That is a savings of $54,000 in the first 5 years.
This jumbo 5/1 ARM program offers an alternative for home buyers who are comfortable with a lower fixed payment for the first 5 years while assuming some potential interest rate risks after the 5th year. This program is not for everyone, but many borrowers can be comfortable with it knowing what the substantial savings is during first 5 years.
As many of you have already heard, its not only credit challenged people that are having trouble finding competitive interest rate financing. You may be a CEO, CFO, VP, with high paying careers, excellent credit and you want to have a mortgage that is over the “conforming” loan limit ($417,000).
If that is the case, you could be financing a “Jumbo” mortgage. Unfortunately, these types of mortgage are not securitized the same way as the “conforming” loans because they are tied in to Wall Street. These Jumbo mortgages are now coming with much higher interest rates; a 30yr Jumbo Fixed rate would be in the mid 7%’s and most Jumbo ARM’s would be somewhere in the mid 6%’s today.
Nick Sivertsen, Summit Mortgage nick@nicksivertsen.com
