1031 Exchange Jumbo Mortgage

If, indeed, there are two certainties in life, death and taxes, then real estate investors just might have found their Juan Ponce de Leon in the 1031 exchange, which allows them to defer capital gains taxes on the sale of a rental property so long as they reinvest the proceeds in a “like-kind” purchase. Spared the death of writing a large check to the IRS, they can find the fountain of youth in a new investment — always with the proceeds of the previous sale and sometimes with the addition of a new jumbo mortgage. Since our fabled 1031 exchanges have strict timelines for both identifying and closing on the new property, the calls I will get requesting help with a home loan for a 1031 exchange often exhibit the urgency of a conquistador lost in the sweltering swampland of Florida.

Can I Get a Jumbo Mortgage for a 1031 Exchange?

The answer is “yes.” But not every mortgage lender has strong options for these scenarios because not every jumbo mortgage investor will lend on a non-owner occupied property. Remember, in residential lending, there are only three occupancy classifications:

  1. Primary. The home in which you live.
  2. Secondary or “vacation.”  A home that is a “reasonable” distance from your primary. A home that is available for your year-round occupancy AND a home into which you’ll enter no rental agreements.
  3. Investment or “rental.” A true, income-producing property.  Only this category is eligible for a 1031 exchange.

Assuming that we have a rental property and assuming that we have a loan amount that exceeds the conforming limit in any metropolitan statistical area (MSA), our borrower/buyer/exchanger will be tasked with finding a home loan may require additional research and, maybe more importantly, expertise on the part of the mortgage originator.

Eureka! I Have Found It

We have a number of investors that will make a jumbo loan on a non-owner occupied property that is being purchased as part of a 1031 exchange.  The most aggressive of our options will permit a loan amount to $2,000,000 with a loan-to-value (LTV) of 80%. This would entail a purchase price of $2,500,000. But there are other elements to a loan approval for an investment property and your mortgage lender will treat each of these differently. They may include:

  • Requirement of property management history (likely the case here since there is an “exchange” of like-kind property, implying that the borrower is already managing another investment home).
  • Calculation of rental income. Some lenders will work off of the lease amounts and some off of the rental survey on the appraisal. We have options for both.
  • Maximum financed properties. Mortgage investors may have limitations on the number of rental properties financed or owned, and this could be a factor for the seasoned investor/borrower.

So indeed, obtaining a jumbo loan on a rental property involved in a 1031 exchange does not have to be as arduous as discovering something of fantasy in a new and foreign land, but it does require a healthy degree of expertise. If you set off to find your own fountain of investment property youth, I’m here to aid your journey and the jumbo home loan boats are ready to weigh anchor.

Turn and face the exchange, 


Robert J. Spinosa

Vice President of Mortgage Lending

Guaranteed Rate

NMLS: 22343

Cell/Text: 415-367-5959 Fax: 415-366-1590


Marin Office: 324 Sir Francis Drake Blvd., San Anselmo, CA 94960

Berkeley Office: 1400 Shattuck Ave., Suite 1, Berkeley, CA 94709

*The views and opinions expressed on this site about work-related matters are my own, have not been reviewed or approved by Guaranteed Rate and do not necessarily represent the views and opinions of Guaranteed Rate. In no way do I commit Guaranteed Rate to any position on any matter or issue without the express prior written consent of Guaranteed Rate’s Human Resources Department.

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