A mansion is a large home typically built with high-end materials and finishes. It usually has luxury amenities, such as a theater, gym, and wine cellar. Mansions cost more than your typical home, so you’ll most likely need a jumbo loan to finance your purchase.
Financing Options for a Mansion
You don’t need to pay for a mansion all in cash — there are several options available, depending on factors such as your location and credit profile.
Jumbo loan
A jumbo loan is for a mortgage amount that’s higher than the conforming loan limits set by government-sponsored enterprises Fannie Mae and Freddie Mac. While higher-cost areas may have higher limits, jumbo loans in 2023 are mortgages for which you borrow over $726,200. Keep in mind that these types of loans may have stricter requirements.
Piggyback loan
A piggyback loan isn’t one mortgage — rather, it’s a tactic to borrow more using two loans simultaneously. Piggyback loans typically combine a mortgage with a home equity loan.
“The first loan covers a large portion of a home’s purchase price, and the second loan or the piggyback loan covers the amount that is remaining,” says Mitchell G. David, team leader of the Beach Life Premier Team with Sheppard Realty in Ocean City, Maryland. “You can use this financing option if you can’t meet jumbo loan requirements, or if you want to try and save money on your loan.”
Conforming loan with a large down payment
If you have the means, you can consider making a large down payment so that you don’t need to borrow more than the conforming loan limits. You’ll need to speak to your lender to see what requirements you have to meet — including how to prove you can make such a large payment.
Costs of Financing a Mansion
Aside from monthly mortgage payment, there are other costs when it comes to buying a mansion. Some of these include the down payment, closing costs, and ongoing taxes.
Down payment and closing costs for a mansion
Jumbo loans are most likely many homebuyers’ choice for financing a mansion. Though the minimum down payment is typically 10% of the home’s purchase price, lenders tend to require 20% down or more — though exact requirements will vary by lender.
You may need to pay more in closing costs as well. That’s because many lenders perform manual underwriting or conduct a second appraisal. The extra costs to complete these tasks may be passed on to you.
To help estimate how much a buyer could pay, here’s a chart detailing approximate down payments and closing costs for various mansion price points:
Upfront Costs of Buying a Mansion
| Cost of the Mansion | 20% Down Payment | 6% Closing Costs |
| $5 million | $1 million | $300,000 |
| $15 million | $3 million | $900,000 |
| $25 million | $5 million | $1.5 million |
| $35 million | $7 million | $2.1 million |
| $45 million | $9 million | $2.7 million |
| $55 million | $11 million | $3.3 million |
| $65 million | $13 million | $3.9 million |
| $75 million | $15 million | $4.5 million |
| $85 million | $17 million | $5.1 million |
| $95 million | $19 million | $5.7 million |
| $105 million | $21 million | $6.3 million |
Mansion tax
Mansion tax is what homebuyers could pay if they purchase a property that’s more than a predetermined price. Don’t let the name fool you — mansion tax can apply to all types of properties over a certain dollar amount. As an example, if you purchase a property in Los Angeles for over $5 million, you’ll need to pay a 4% mansion tax.
Not all states or counties charge mansion tax, so speak with a real estate agent to make sure.
Can You Convert a Normal House Into a Mansion?
Whether you can transform a normal house into a mansion depends on factors such as the size of your land and how you want to convert your existing home. For those who have enough land, it could be possible — though you may need to forgo amenities such as an outdoor pool or a large garden. Plus, if you want to convert your existing home, you may have to do more work to upgrade the materials and design so that it feels like a mansion.
Even if you have the space and financial means to convert a typical house into a mansion, you’ll need to consider whether your local regulations allow you to build this type of structure on your property. Some zoning laws may only allow homes to be built up to a certain size, so it’s best to consult your local zoning authority before starting on any type of development.
FAQ
Here are some answers to frequently asked questions about financing a mansion.
