Financing the Most Valuable Homes

David Bates / February 4, 2011-1:01 pm

I spoke with Terry Mullany, a vice president at JPMorgan Private Bank, a company with a website which asserts it has 160 years of experience “solving the complexities of significant wealth day in and day out.” Terry’s team at JPMorgan focuses on providing top-notch service to high and ultra-high net worth individuals. The Private Bank can assist clients in financing for homes, boats, planes — even art. We spoke briefly about some of the financing options available for folks looking to purchase Massachusetts’ best homes.

Terry communicated that as the value of the home purchase goes up, typically so to does the equity deposit lenders require from buyers. While home buyers could get a loan of 80 percent on a million dollar home, for homes valued in the $2 million-$3 million range, they usually qualify for only a 70 percent loan on a primary residence and 60 percent on a secondary residence. On a $3 million-$5 million home purchase, the lenders’ participation generally goes down to 65 percent for a primary home and 55 percent for a secondary home. In the $5 million-$10 million range, home buyers may put up 45 percent and could get financing for the other 55 percent.

If, however, prospective luxury home buyers wanted to keep their cash in investments rather than put that money into a non-working asset like home equity, the Private Bank has a program that will allow them to do so. In essence, the buyers take a loan to buy a home (or even renovate a home) without it being a home loan at all. Clients could simply move their investments over to JPMorgan Private Bank and, in many cases, take as much as 80 percent of the investment value to go toward the home.

For example, if you were a high-equity client, you may be able take your $3 million stock portfolio and create a JPMorgan Private Bank account with the investments, and they would give you up to $2.4 million to make a home purchase. Another advantage of this program is that you could close fast on the home, perhaps within 10 days, as the loan would not be subject to a home appraisal. One possible disadvantage is the interest payment. Although very, very low, payments would not be subject to the tax benefit of a mortgage interest payment. But considering the benefits and the fact that the mortgage interest payment benefit ends at $1.1 million anyway, these solutions may be hugely helpful.

These are just a couple of solutions for financing the purchase of great homes. Note, the Private Bank wants to be known for bold and innovative thinking and providing the structure and commitment necessary to build a comprehensive plan around an individual’s particular situation, so there may be other solutions available for your situation. Check with Terry.