Cash is a viable option in the luxury home market

For hopeful homeowners who have the money, cash is the way to go in a struggling home industry, according to a recent Wall Street Journal article.

Massive down payments in cash are becoming a more popular option, as they can skirt around large mortgages and help ensure lower interest rates. For example, Aaron Schindler bought his co-op in New York's Upper West Side by putting down 45 percent up front and trading a jumbo mortgage for a smaller 4.37 percent rate.

Inititally, Schindler thought he would make a down payment of 30 percent and then borrow the rest. However, he learned that the jumbo loan would come with a 4.65 percent fixed rate. 

"We're seeing more and more cash buyers coming into the market in the jumbo arena – much more than we've previously seen," Jeff Gennarelli, president of Illinois-based Bridgeview Bank Mortgage Company, told the news source.

According to mortgage-info website, private jumbo mortgages charge higher rates than smaller home loans, averaging 4.04 percent compared with 3.54 percent, respectively. A jumbo mortgage starts after $417,000 in most of the nation, but can start at $625,501 in some more expensive metropolitan areas.

When borrowers increase their down payment, they can save on interest while still taking advantage of tax benefits, according to the article.

Overall, sales of million-dollar homes are on the rise, and real estate agents claim home owners are more likely to accept an offer if it doesn't involve financing.

However, as avoiding jumbo home loans are not always a viable option, lenders should use mortgage loan software, paired with an amortization calculator, to ensure that loans and monthly payment plans are created for each borrower and his or her financial needs.