Super Jumbo—it sounds like an action hero in a summer blockbuster. In fact, the term applies to home loans for colossal amounts—typically $2 million to $20 million and up, depending on the lender. Bigger loans might seem like a bigger risk, but many lenders see them as a sweet spot.
Qualified wealthy home buyers aren’t likely to have trouble finding financing of up to $10 million at the nation’s biggest banks, says Mike McPartland, head of investment finance for Citibank Private Bank North America.
Super-jumbo borrowers usually are already bank customers, typically of the private-bank division, which provides an array of wealth-management services, he adds. “Chances are we know the client, and we know what we are comfortable advancing to that client,” Mr. McPartland says.
The super jumbo’s popularity doesn’t just come down to relationship banking, though. New York-based mortgage bank Guardhill Financial Corp. is finding it significantly easier to finance and sell super jumbos between $4 million and $20 million now than a year ago, says CEO Alan Rosenbaum. Describing the attitude of some of its approximately 50 mortgage investors, “It’s easier to underwrite one loan for $4 million than 10 loans at $400,000 each,” he adds.
What gives lenders confidence is that most high-net-worth borrowers choose, rather than need, to borrow to buy a home or pay for improvements, says Erin Gorman, national director of mortgage sales for BNY Mellon Wealth Management, which has an average mortgage loan size of $1.2 million. With low interest rates, these borrowers calculate they will have a higher yield keeping money invested and avoid capital gains taxes from the sale of a growing asset. “If interest rates were to jump up quickly, they could choose to pay down, pay off or shift to a different loan structure,” Ms. Gorman says.
read more: http://www.wsj.com/articles/more-options-for-mega-mortgages-1433961979
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