Great time to buy a mansion on credit

Great time to be buying mansions on credit. This one in Rhode Island went for $10.5 million back in 2010

Those seeking jumbo loans for homes paid on average just 0.14 percent more than people with conforming loans last week, as the spread between the two types of mortgages continues to shrink.

The Mortgage Bankers Association reported Wednesday, conforming, 30-year fixed mortgages, for loans with outstanding balances of less than $417,500 nationally, got on average a 3.61 percent rate last week. Those seeking mortgages for jumbo loans got a rate of 3.78 percent. Jumbo loans in Connecticut actually start at $600,000.

Both rates ticked up from the previous week, but the jumbo rate grew at a slower rate. The spread between the two has been around 0.23 percent for the last couple weeks.

While interest rates on nonconforming loans are at historic lows, realtors report sales of big ticket homes, like this Newport, RI mansion once owned by the Astors, are being paid for in all cash transactions. Still, there are some who might prefer to take the loan and invest their money in something that could outperform the interest rate.

Historically, jumbos usually carry a higher rate because Fannie Mae and Freddie Mac won’t purchase them, so private lenders usually must keep them on the books or sell them into a limited market. However, there remains significant concerns about Fannie and Freddie’s balance sheets and banks and other institutions are catering to the wealthy in order to capture more business from investments and other services.

Overall, mortgage applications in the nation increased in the first week of this year by 11.7 percent with applications for new home purchases up 10 percent. Refinancing still accounts for 82 percent of the market and that activity was also up in the first week.

Rob Varnon