NEW YORK – Aug. 14, 2014 – Wealthy borrowers have an easier time getting a mortgage, with banks issuing a record number of mortgages in excess of $1 million – but they continue to keep lending tight for first-time home buyers, Bloomberg News reports.
“These high-net-worth borrowers do act differently than first-time buyers, who borrow because they have to,” says Erin Gorman, managing director at Bank of New York Mellon Corp., whose bank recently provided a mortgage of more than $6 million to a client to buy a second property in Colorado. “High-net-worth borrowers don’t have to borrow. They choose to, so they’re very strategic about what, why and when they borrow.”
The wealthy are choosing to borrow while mortgage rates are still low, with some fetching mortgage rates as low as 3.15 percent for a seven-year adjustable-rate mortgage. By choosing to finance, the wealthy borrowers can avoid liquidating other investments to purchase the home.
For wealthy homebuyers of single-family homes, the number of loans from $1 million to $10 million in the 100 largest U.S. metro areas soared by more than 15,000 in the second quarter, the highest point ever, according to CoreLogic, a housing data provider.
The luxury market has been heating up in recent months. During the first half of this year, sales of homes costing at least $2 million in 30 of the biggest metro areas increased to the highest since at least 2006, CoreLogic reports. What’s more, sales of existing homes of $1 million and more rose 8.5 percent in June compared with a year ago, which was the biggest jump among all price ranges, according to the National Association of Realtors®.
Source: “Million-Dollar U.S. Housing Loans Surge to Record Level,” Bloomberg News (July 29, 2014)
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