Compared to other mortgage rates jumbo mortgage rates can vary greatly. A jumbo mortgage is one where the amount is greater than the industry-standard limits. The limits are set by the two largest wholesale home loan lenders which are Fannie Mae and Freddie Mac. There are also “super-jumbo” loans which is anything in excess of $650,000. This limit can vary, as it did when it was temporarily increased until the end of 2008, although some say that doing so was not beneficial.

The rate on a jumbo might be different from a standard conforming loan, typically higher. The rate in normal economic conditions might be a quarter of half a percent higher, but in times of great economic uncertainty it can be more than one percent. This is because such a home loan is a greater risk to the lender because luxury homes typically take longer to sell and are also more affected by the changes in market conditions. Due to the slightly higher risk, the down payments for jumbos are also typically higher than for standard loans.

Due to increase in real estate prices up to about 2008, more borrowers had to seek these larger than standard loans. This tends to result in longer-term loans, sometimes 40 or even 50 years, for which the lender takes a higher profit. Also if the down payment was less than twenty percent, the loan had to be insured, resulting in fees which were sometimes considerably higher.

However in recent times this insurance rate is sometimes built into the loan interest rate so a borrower can pay less than the 20% down payment without excessive fees. This structuring might not be as beneficial to borrowers as if initially appears because if the insurance fees were paid separately they often cease all together when the borrower has repaid more than 20% of the loan.

The rates themselves can of course vary considerably over time. Typically they might be lower in times of economic hardship or uncertainty.

Compared to other mortgage rates jumbo rates are usually slightly higher than for standard loans due to the slightly higher risk to the lender.

Author: Thomas Goldman
Article Source: EzineArticles.com
Provided by: Canada duty rate