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Consider alternative to jumbo mortgage

If you're looking for a mortgage of more than $240,000, you probably know that lenders charge a premium.

But in an effort to take the sting out of jumbo loans and make a little more profit for themselves, some lenders are offering an alternative. Instead of a jumbo mortgage at 7.5 percent or more, get an ordinary 30-year mortgage at 7 percent or less and finance the balance with a home equity line of credit.

This can work for a home buyer who needs to hold down initial costs because the combined payment on a smaller first mortgage and the home equity line will be less than the cost of a jumbo mortgage. However _ and this is a big caveat _ this works only if you just pay interest on the home equity line initially.

Here is an example from Countrywide Mortgage, a national lender.

The Smiths need a $280,000 mortgage. They could get a jumbo loan at 7.6 percent with a monthly payment of $1,981.

Alternately, they could get a standard mortgage of $240,000 at 7 percent, at a monthly cost of $1,596. The remaining $40,000 would go on an interest-only home equity line at 8.3 percent with payments of $279 a month. The two payments total $1,875, or about $100 a month less than the jumbo loan.

If you choose this option, keep in mind you are paying interest only _ no principal _ on the home equity line.

Should you want to pay off the equity line in a typical 15 years, your payment would rise to $390. And that would bring the total monthly payments back to $1,986 _ just about the same as for the jumbo loan.

If your goal is to have the lowest payment possible, the home equity line probably will be appealing. It also offers more flexibility _ pay it off and you have an open line of credit for emergencies.