A growing trend in the banking world is to offer high-end perks – some worth tens of thousands of dollars – to wealthy homeowners, in an effort to get them to take out a large home loan, according a recent article in The Wall Street Journal.
While many of these luxury property purchasers could pay in cash, banks are offering them discounts on mortgage rates, closing costs and "points" – optional fees borrowers can pay upfront in order to obtain a lower interest rate.
"Our overall jumbo loan business has increased, which we clearly attribute to the pricing incentives," Matt Vernon, home-loans sales executive at Bank of America told the news source.
For example, earlier this year, Bank of America started a program where they offered a 0.5-percentage-point discount on points paid toward mortgages for customers who have more than $250,000 in assets with the bank.
Even with the discount, though, borrowers would be able to benefit from an amortization schedule for loans, ensuring payments happen on time. Additionally, the banks benefit from such offers as it will help them to recoup lost revenue – recent regulations have limited the revenue banks collect from overdraft fees and credit cards.
Overall, the housing market is continuing to recover. As reported by USA Today, home prices are at an all-time high in several cities, including Pittsburgh and Anchorage.
The Lender Processing Services released data showing that 100 metropolitan areas hit their peak high and another 50 areas are within 2 percent of their previous peaks. Combined, the 150 locations account for 7 percent of the nation's residential housing stock, according to the source.
Whether an individual is considered to be a luxury homebuyer or not, lenders would be wise to invest in loan management software to ensure that a proper mortgage payment plan is created.