How does the interest rates for jumbo loans compare to that of conventional loans?
The interest rate on a jumbo loan is usually higher than that of a conforming loan because the risks to the lender are higher. For example, if the buyer defaults, a luxury home is hard to sell quickly at its full value. Luxury homes are simply more vulnerable to market highs and lows. Because of this, jumbo loan interest rates usually run between .25% and .5% higher, and have jumped as high as 1% higher during times of housing turmoil or high investor anxiety. Other factors that determine the interest rate include property types and mortgage amounts.
