Financing the Luxury Purchase

By: Jennifer Martin: REALTOR® Magazine Online
There are several financing tools available to wealthy homebuyers, including interest-only loans that free up cash for their businesses or other investments.

They also can take advantage of ladder financing, which allows borrowers to obtain a variety of different loans tied to a certain amount of principal. For example, buyers of a $1 million property might link $600,000 of the principal to a one-year interest rate based on the London Interbank Offered Rate and the remaining $400,000 to a five-year fixed interest rate.

Luxury-home buyers additionally can pledge their stocks, bonds, CDs, mutual funds, and other assets as the downpayment, preventing them from having to liquidate and pay capital-gains taxes.

Finally, affluent borrowers can obtain option adjustable-rate mortgages, which benefit those who are self-employed or simply need the flexibility to choose the payment amount that best meets their needs on a month-to-month basis.