What the loans outside the box actually cost

Why these loans are hard to see

Every rate you read about — the weekly survey, the average in a news story, the figure on a lender’s homepage — describes the same loan: thirty years, fixed, inside the county limit, income documented with tax returns. It is the loan the agencies buy, and it is roughly seven mortgages in ten.

The rest are priced somewhere else. A loan above the county limit is held by the bank that wrote it. A loan with an interest-only period, a balloon payment or a prepayment penalty is written to terms the agencies will not take. A loan on a property bought through an LLC is business-purpose lending and leaves the consumer rulebook entirely.

None of this appears in any published rate. It does appear in the filings, one loan at a time, and that is what this piece counts.

What the filings show

The table above is every purchase loan in the year, split by whether it carries each condition, with the median rate on both sides. Four things stand out.

Interest-only costs a full point of rate. These are not cheap loans that defer principal — they are expensive loans that also defer principal. The fee side is higher too. Whatever the payment relief is worth, it is bought, not given.

Adjustable rates are the one condition that prices below fixed. That is the trade in its entirety: a lower rate now for a rate you do not know later. The filings can show you the first half of that bargain and can never show you the second.

Prepayment penalties come with a higher rate, not a lower one. The theory of a prepayment penalty is that the lender, protected against early payoff, can charge less. In the filings the loans that carry one are priced above the ones that do not, and their fees are higher as well. If you are offered a penalty, the discount it is supposed to buy is worth asking about directly.

Business-purpose loans are a different market. They price well above consumer loans and report costs so rarely that the median cannot be computed at all. A property bought through an entity is not covered by the disclosure rules this site is otherwise about.

Above the county limit

Jumbo lending is the one place where the surprise runs the other way.

Loans above the county conforming limit were written at a lower median rate than loans below it. It is not a rounding artifact and it is not new: banks keep these loans on their own books rather than selling them, they compete hard for the customers who take them, and the borrower who needs one arrives with a large down payment and a strong file.

What jumbo borrowers do pay more of is fees, and by a wide margin — the loans are larger, and the percentage-based charges scale with them.

The practical consequence is narrow but real: if your loan is a little over your county’s limit, the advice to “get under the limit at any cost” is worth checking rather than assuming. Getting under it saves the agencies’ price adjustment, but it does not automatically save you rate.

What this cannot tell you

There is no non-QM flag in the data. Bank-statement loans, profit-and-loss loans, DSCR loans, asset-depletion loans — the products a self-employed borrower is most likely to be offered — are invisible here. The register records what the loan does, not how the income was proved. Everything above is about loan terms, not underwriting method.

Medians describe groups, not offers. The people who take an interest-only loan are not the people who take a thirty-year fixed, and part of every gap here is the difference between those two groups rather than the price of the feature itself. The register has no credit scores to correct for that with.

Purchases only. Refinances are excluded throughout: the mix of borrowers is different and mixing them would compare two markets at once.