Why are jumbo mortgage rates higher than conventional (conforming) loans?
There are a various reasons, but the main two have to do with lender risk and lower resale demand on the mortgage market. Since many jumbo loans are used to purchase higher-end luxury residences, in the event of default, these homes are more difficult to sell at full value in attempts to recoup the initial investment. Therefore, lenders must compensate for this risk by charging higher interest rates than those generally associated with conventional mortgages.
