Jumbo vs. AIO
Once a loan exceeds the conforming limit of $802,650 you enter the world of jumbo options.
To get a jumbo loan, you will have to:
Put 10-20% down. (Note: Any down payment less than 20% will cost you--significantly, and may require a 740+ credit score.)
Pay at least 1 point to get a 7% fixed rate (as of 11/22).
Have strong credit: the higher your score, the better your rate.
Pay significantly more in interest than a conforming loan with a lower rate.
Obviously, the higher the loan, the more expensive the interest. In our example scenario on the homepage, we talked about a $450,000 loan. The savings were significant. Imagine if the loan was 4x that: $1.8M. The savings would be all the more impressive.
On a $450,000 loan, buying the rate down one point only costs $4,500. On a $1.8M loan, that point will cost you $18,000. Remember, most jumbo options will require at least one discount point to even qualify. That's a steep addition to your closing costs!
Bottom line: The AIO is superior to any 30 year loan—especially Jumbo!—assuming you make more than you spend.
The degree to which the latter is true will be the degree to which the former is true. This is absolutely the case when comparing AIO to Jumbo:
You're putting 20% down either way.
You don't have to pay a discount point to get an AIO (though you can if you'd like to buy the margin down.)
Your interest savings will be even greater than they would in a conventional loan.
Finally, the AIO giving you access to your home's equity is a serious tool in jumbo-land. Having a line of credit for up to $2M would mean you could pounce on several investment opportunities all at once--without having to go through any of the steps to secure financing.
