Super Jumbo Mortgage

Due to the unconventional requirements of many super jumbo mortgage applicants, the popularity of unconventional mortgage programs amongst the wealthy is understandable. The popularity in particular of cash flow option ARM loans with super jumbo mortgage applicants is due in large part to the difference in perception of negative amortization in the context of their primary residence not being an asset but a liability. When home equity is substantial as required by the more stringent LTV requirements of super jumbo mortgage underwriting, negative amortization allows a borrower to extract more of the cash locked in the home’s equity than would otherwise be possible, short of selling the property, due to the ability to defer interest above and beyond the Loan To Value stipulated on the note. In a conventional mortgage with principal and interest or interest only amortization, the borrower would be required to take out a second mortgage or line of credit to accomplish the same goal, but CLTV guidelines from most super jumbo lenders preclude the use of most of these products for this purpose. This is not to say that second mortgages and lines of credit are uncommon in super jumbo lending, in fact quite the opposite is true, but “piggyback” or “80/20” transactions which are common in conforming and jumbo loan financing are not as prevalent. Another popular application for the use of negative amortization loans by super jumbo mortgage borrowers is to shift as much of their taxable income to long term capital gains as possible by taking advantage of the lower monthly carrying costs and the ability to make lump sum payments at annual or semi-annual intervals. Super Jumbo Option ARM mortgages are also available in hybrid form, with fixed rate and fixed payment periods of 3, 5, 7 or 10 years, although they are relatively new on the super jumbo mortgage scene and not necessarily available to 8-figure loan amounts ($30 Million and up).

Super Jumbo mortgage lending is a niche activity, not engaged in directly by most consumer focused banks. The preponderance of Super Jumbo lending is arranged by mortgage companies who specialize in financing these multimillion-dollar transactions with the help of investment banks and private mortgage capital sources.