Jumbo Loan Options: What to Know About Terms and Rates

In Honolulu County, as in many neighborhoods throughout the islands, more than half of the single-family homes hover near a million. If your family is in the market for one of those houses, or perhaps a multi-family property with some rental potential, odds are good that you might be looking into jumbo loans: a special type of home loan for big buys, starting at $1,089,300 for single-family home loans in Hawaii.

What’s the average interest rate for a jumbo loan?

In some ways, there’s really no such thing as an typical interest rate for a jumbo loan. Banks will want to understand a range of factors about your specific situation, and many, like ASB, are ready with discounts on the base level rate if you’re able to meet certain jumbo loan criteria, like a higher credit score or more down payment dollars to contribute.

Should we aim for a fixed-rate jumbo loan, or an adjustable-rate jumbo loan?

Just like home loans in lower amounts, there are both fixed-rate mortgages and adjustable-rate mortgage (ARM) options. But when we’re talking about a higher total loan amount, a small difference in percentages or terms could end up having higher stakes when you multiply out the implications over time.

When selecting a loan, you may want to start with the following considerations:

1. How long do we want to own this property for? Is this a generational plan, or something we expect to sell in a few years?
2. What’s our time frame for paying off this loan? Will we refinance, or pay it off, before the fixed-rate period would finish on an ARM?
3. What are our plans for this property? Will we live in it or rent it out? How much of our mortgage payment will rental cash flow cover, and can we afford to cover the difference every month?

ASB’s vice president and executive residential loan officer Reyn Sugai explains that, since the dollar amounts you’re borrowing are higher with jumbo loans, the implications of a tiny difference in interest rate can be pretty huge when you calculate your future monthly payments.

Is a jumbo loan right for me?

It’s really important to understand what discounts are available to you for your particular set of circumstances when getting a jumbo loan, how long the fixed rate period will be on your ARM (and whether you plan to refinance before then), and what your payment schedule would look like on a long-term fixed-rate mortgage option before making the final call.

There are lots of online tools available -- like this comparison calculator or this adjustable rate mortgage payment estimator you can tinker with -- but the best creative solutions and most helpful insights always come from personal conversations with the experts about jumbo loan options. Contact our loan officers to talk story about your plans and options, any time. You could be talking about a difference of hundreds even thousands of dollars in payment amounts, so doing the analysis carefully is time well-spent.