This story was published in the San Francisco Sunday Chronicle Real Estate Section

• Property type: An owner-occupied single-family residence in San Francisco
• Appraised value: $1,525,000
• Borrowing amount: $820,000
• Loan type: 10-Year Fixed Rate, Interest-Only Payment Option, 40-Year Term
• Rate: 3.875%

Backstory:

Borrowers refinanced from their old loan at 5.25% to increase their monthly cash flow by $1,835 and make larger contributions to their retirement plans. This was especially advantageous for the wife whose employer matches her monthly retirement plan contributions. Before refinancing, this couple did not have enough monthly cash flow to take advantage of this opportunity because their interest rate was higher and the old loan required principal reductions. Working with their investment advisor, this couple realized that it was a lot more valuable to direct their cash to a conservative retirement investment account earning 6 to 7% than to pay down a loan that only costs only 2.50% after taking the mortgage interest deduction on their income taxes. Even without the employer’s matching funds this made good sense. The matching funds made the choice easy.

This loan was also unique because the loan-to-value ratio was 80%. Very rarely do jumbo loans offer both (1) the option for interest-only payments and (2) a loan-to-value of 80%. We directed this couple to one of the very few investors who make home loans in California on these terms.