DECEMBER 11TH, 2018

Interest Only JUMBO Loan Mortgages

A Jumbo Mortgage can be obtained via a number of different programs/plans. In fact, a “Six Month LIBOR Interest Only Mortgage” loan has become very popular for Jumbo loans.

Many consumers are interested in knowing what reason they might have to investigate a Jumbo Mortgage. In basic terms, a Jumbo Mortgage assists consumers in buying a more expensive home than they normally would consider.

Consumers should consider a Jumbo Mortgage if they need to borrow more than $417,000. The cutoff between standard mortgage loan programs and Jumbo Mortgages for a single-family is $417,000. Fannie Mae (FNMA) establishes the Jumbo Mortgage limits every year. Consumers may use a Jumbo Mortgage to buy any type of residence such as primary homes, second homes / vacation homes or there may be other investment properties the buyer is looking at.

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Overview of A Six Month LIBOR Interest Only Mortgage

• Six Month LIBOR Loans – The interest rate for this option is the sum of the LIBOR index plus a margin which is rounded to the nearest one-eighth of one percentage point (0.125%). Margin will not change during the term of the loan; however, the index value will be adjusted every six months and by doing so will cause the interest rate to be accordingly adjusted. Interest Only payments are typically effective for the first five or ten years of the note.

• Will a Six Month LIBOR Come with Caps? Yes, although it differs between lenders – the cap for the initial adjustment is typically 1%, and each periodic cap thereafter is also 1% with the lifetime cap being 6% over the initial rate.

• Will a Six Month LIBOR Require a Down Payment? – Yes. A consumer would have to put some money down for this loan.

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Advantages & Disadvantages of JUMBO Mortgages in General

The premium advantages of JUMBO Mortgages are: 1) buying a more expensive home than they normally would consider (that dream home); 2) consumers could be interested in a Jumbo Mortgage if they are considering investing their money by having multiple properties; 3) Consumers should consider a Jumbo Mortgage if they need to borrow more than $417,000.

The main disadvantages of JUMBO Mortgages are: 1) Interest Rates will be a bit higher than they would if the consumer decided on a more standardized mortgage.

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