Super Jumbo Luxury Mortgage Loans, Lenders and Rates

[AJ Wong]

Super Jumbo mortgage loans and lenders can vary widely in their rates and qualifications. 

One observation in working with higher loan amount borrowers and lenders recently is that rates can often be LOWER than conventional loan amounts. 

In the present mortgage environment it appears that super jumbo mortgage lenders have preference towards a perceived 'stronger' loan. 

Most national or mainstream mortgage lenders do not offer Super Jumbo mortgage loans (typically above $1.5-$2.5M) Although Super Jumbo Loan Lenders can provide loan amounts from $3M-30M+

The majority of these buyers obtain their mortgage recommendation through their real estate professional or frequently through their existing private or premium banking relationship. 

Some general themes or characteristics of super jumbo mortgage loans are: 

- Lower LTV's (Loan to value) depending on the strength of borrower and property type very large loans can require 30-40% down. There are super jumbo mortgage lenders that require less (10% down).

- Higher reserve requirements. The greater ability to repay, the greater chance of qualifying. 12-24-36 months of reserves are a common underwriting condition. 

- Two appraisals. Higher loan limits generally mean the appraisal will be reviewed a bit more closely. Often above loan amounts of $1.5M-2M lenders will want two appraisals by highly qualified appraisers. 

- ARM's. Interest rate and payments are often amplified at expanded loan limits. Many borrowers can obtain a significantly lower interest rate with a 3/1, 3/6 5/1, 5/6 or 7/1 adjustable rate mortgage. Since the likelihood of default is lowered with a condensed timeline (and most borrowers will refinance before the adjustment period) the interest rates on ARM's can be .5-1.5% lower than typical 30 year fixed mortgage options.

- Interest only. Many Super Jumbo mortgage lenders offer an interest only component. On a mortgage note of several million dollars the effect on the monthly installment can be dramatic. 

- Asset utilization. Use liquid assets to assist in meeting full doc debt-to-income (DTI) ratio requirements.

- Cross Collateralization. Can be utilized to reach a higher Loan-to-value (LTV) by pledging against an additional free and clear home or property.

- Portfolio and private loan options. Lenders often have 'in house' capital to lend that can be accessed via exception or compensating factors. Often direct mortgage banks or lenders have an asset allocation monthly, quarterly or seasonally that they utilize to fund loans that are outside of 'the box' or need specific terms or conditions to qualify. Furthermore some lenders have private or institutional funds that can offer (usually shorter duration) terms lower than market rates. 

- Priority processing and underwriting. The larger the transaction, typically the more difficult to successfully reach a transaction. Timeliness and communication is critical when dealing with luxury markets and acquisitions, super jumbo focused lenders will often have dedicated processors and underwriters familiar with luxury real estate transactions. 

What have been some challenging or success stories involving super jumbo mortgage financing for luxury homes? How did you or your client connect with your mortgage professional? Any lenders offering exceptional terms on $3M+ loan amounts? 

Our most recent funding was a luxury FL penthouse condo refinancing an expiring private 1st jumbo mortgage of $2.5M+ consolidated with a 'smaller' second lien with an LTV of 70% that closed in two weeks.