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| Data Source: CoreLogic, August 2018 |
Across America there are approximately 230 homes with very large mortgage balances, anywhere between $10 to $20 million dollars. According to Arthur Jobe at CoreLogic Insights, close to 75 percent of all those mortgages originated back in 2013 and out of those, 180 were refinances. In fact, those refinances were mostly originated in 2013 as well.
It is unlikely that these homes are in your neighborhood (or even ours), unless you live in California, since 55 percent of those super jumbo refinances come from that state, no surprise there. As for the rest, about seventeen percent you originate from Florida, and around 4 - 6 percent in states like Massachusetts, Connecticut, New York and Texas.
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Data Source: CoreLogic, August 2018
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No doubt, even billionaires love to save money, and this is the reason ARMs (adjustable rate mortgages) are very popular for these types of loans due to their initial lower rates. In fact, around 76 percent of borrowers who refinance these ARM loans choose to go with another ARM, and about 31 percent who refinance their fixed-rate mortgages switch to ARMs. Why? The answer is logical, most of these borrowers won't see their adjustable period take effect until the end of 2024.
Of course, getting a lower rate is all well and good, but it was not the only reason these borrowers decided to refinance, CoreLogic data reveals forty-seven percent got cash out. One other major reason is consolidation, which makes up about 21 percent of the refinances. Keep in mind also that the cash out amounts tend to be... well huge; these refinance loans average were $6.6 million, even bigger than the mortgages they replaced, and now that average leaped to $8.3 million in 2018.
If a borrower chooses a fixed-rate, it turns out they also most likely choose a 15-year term, and the data also shows that just three large banks monopolized around half of all those loans.
As the saying goes, if you have to ask, you can't afford it, but just to satisfy your curiosity, the Principal and Interest payment on a $20 million 15-year mortgage at 3.25 percent is only $140,534.
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Data Source: CoreLogic, August 2018
