Jumbo Mortgage Loan : March 2008

Negative Amortization adjustable mortgages are looked at as if they are inherently evil in the current economic situation we find ourselves in. However, if you look beyond the surface, a case can be made that this type of  mortgage will be a good bet for the foreseeable future.

Lenders that offer this type of loan often base the rate on the Twelve Month Treasury Average index. This index is a rolling average of the monthly average of the One Year Treaasury Bill. As each month goes by, the rate for the oldest month in the average drops out, and the rate for the newest month is added.

Currently, the Twelve Month Treasury Average is at 4.076%. The current yield on the One Year Treasury Bill is 1.33%. What does this mean?

You are right - the Twelve Month Treasury Average Index rate is going down. If you can get a low margin, you are going to have a pretty good rate compared to what else is being offered in the mortgage marketplace.

Of course, discipline is required for this type of loan. I recommend either making the interest-only payment, or saving the difference between the minimum payment and the interest-only payment in a safe side account with a compounding return that outpaces the negative amortization accrued.

 Before you make your next jumbo loan choice, ask your mortgage advisor about a negative amortization loan!

There is plenty of information being disseminated as to why jumbo mortgage rates have increased recently. What hasn't been discussed as much is that there are some lenders who are offering attractive jumbo rates - you just need to do a little work to find them.

If you think rates are going to stay low for a while, Suntrust Mortgage is offering very attractive adjustable jumbo rates. For example, today they are offering a wholesale base rate of 4.625% on a 6 month adjustable with a rebate of .215% to the broker (there may be other charges on top of this - consult with your local broker). Interest-only payments and stated income documentation are offered also.

If your time horizon for your loan is longer, ING Mortgage is offering a jumbo adjustable rate with the first 5 years fixed at 4.875% with a base cost of 1.625 points (again, the broker will add on his fee on top of this cost). Interest-only payments are available, and you do not have to disclose your liquid assets!

If you need to borrow a lot of money (up to $5 million), First Federal Bank has some attractive options. They are offering a jumbo adjustable rate with the first 5 years fixed at 5.15% with a base cost of 1.125 points plus the broker fee. A 3 year pre-payment penalty is required, but they have other terms with a shorter pre-payment term, or no pre-payment penalty at all. For you borrowers with super jumbo rate needs, this could be the lender for you.

 Again, there are attractive jumbo rates available. Contact a competent mortgage broker to help you find the best program.