Beachfront Living in Malibu and Santa Monica: Mortgage Insights for Home Buyers

Santa Monica and Malibu are two of the most popular cities in Southern California. They offer beachfront living, outdoor recreation, and some of the best weather you’ll find anywhere.

But for all of these same reasons, Malibu and Santa Monica are two of America’s most expensive real estate markets with median prices well above $1 million.

As a result, home buyers in Malibu and Santa Monica often have to use specialized mortgage financing and make bigger down payments, compared to other lower-priced markets.

In this article, we’ll provide an in-depth analysis of beachfront living in Malibu and Santa Monica to help you make a highly informed decision before buying.

Expect High Home Prices in Malibu and Santa Monica

Malibu and Santa Monica are both coastal cities located within Los Angeles County. But from a real estate market perspective, the similarities end there.

While both markets have home prices much higher than the national average, Malibu is the pricier by far. That’s the first thing home buyers need to know, when weighing their mortgage options for luxury homes.

For some perspective, here were the median home prices as of late 2024:

• Malibu, CA: $3,383,602
• Santa Monica, CA: $1,657,987
• California (statewide): $771,000

Because of these high prices, most home buyers in Santa Monica and Malibu use conventional mortgage financing as opposed to government-backed loans. And a lot of those conventional mortgages fall into the “jumbo” range due to their large size.

Why Jumbo Loans Are Common in Coastal L.A.

But before we go any further, we should define some important terminology:

• Conventional: A loan that is not backed by a government agency (like FHA or VA loans). These loans often adhere to the guidelines issued by Fannie Mae and Freddie Mac. But they do not receive any form of government insurance or guarantee.
• FHA: A loan that’s insured by the Federal Housing Administration. FHA loans are designed to make homeownership accessible for borrowers with lower credit scores or smaller down payments. But they have size limits imposed by the federal government.
• Conforming: A conventional loan that meets the size limits and underwriting guidelines set by Fannie Mae and Freddie Mac. Conforming loan limits can change from one year to the next.
• Jumbo: A loan that exceeds the conforming limits mentioned above. Jumbo loans in California are not eligible for purchase by Freddie Mac or Fannie Mae, so they typically have stricter credit, income, and down payment requirements.

Jumbo loans tend to be more commonly used for high-priced real estate in Southern California, and less common in more affordable parts of the country.

In a city like Malibu, for example, the median or typical home price is well above the conforming limit for conventional loans. It’s also higher than the limits used for FHA loans. So those loans aren’t very useful in such a market.

Santa Monica home prices are lower than Malibu, but still miles above the national average. So a home buyer in Santa Monica might have more options when it comes to mortgage financing.

The bottom line: In expensive real estate markets, many home buyers have to rely on jumbo loans to clear the hurdle. These loans may require a larger down payment and higher credit score, when compared to their conforming counterparts. But they’re also very useful.

Other Mortgage Strategies to Know About

Here are some other mortgage products, strategies, and concepts you should know about, when financing a home purchase in Santa Monica or Malibu.

Discount points: With this strategy, borrowers pay extra at closing in exchange for a lower interest rate. If you’re planning to stay in the home for a long time, discount points could save you a lot of money by reducing your interest costs.

Portfolio loans: These are mortgages that lenders keep in their own portfolio, rather than selling them. This allows the lender to set their own guidelines and offer more flexibility, including higher limits. But not all lenders offer them, and they typically come with higher interest rates.

ARM loans: Adjustable-rate mortgage (ARM) loans often start with lower interest rates compared to fixed-rate mortgages. This gives the borrower an opportunity to save money during the first few years of homeownership. ARMs can be a good option for those who plan to sell or refinance the property within a shorter time frame, such as five to seven years.

Professional guidance: Pricier real estate markets bring additional homework for borrowers. There’s a lot on the line when buying a home in a place like Malibu or Santa Monica. This underscores the importance of professional guidance. We offer jumbo loans and work with borrowers all across California. So don’t hesitate to reach out for assistance!

Current Mortgage Rate Trends in California

Current mortgage rates in California vary based on factors like lender, loan type, and borrower credit profile. As of now:

Tips for First-Time Luxury Home Buyers

Before you consider a home purchase in a high-priced real estate market like Malibu or Santa Monica, consider the following suggestions:

• Understand Your Budget: Account for higher costs like property taxes, maintenance, and insurance.
• Research the Market: Study local luxury markets to know current trends and property values.
• Secure Financing Early: Get pre-approved for a jumbo loan or other luxury financing options.
• Prioritize Features: Focus on must-haves, such as location, views, or amenities.
• Work with Experts: Hire an experienced luxury real estate agent and financial advisor.
• Plan for Inspections: Conduct thorough inspections for unique features like pools or smart systems.

Key Differences Between These Real Estate Markets

We talked about the price difference between the Malibu and Santa Monica real estate markets. While both cities are considered luxury markets, homes in Malibu tend to be more expensive.

But there are some other key differences as well:

1. Pace: The Malibu real estate market tends to move at a much slower pace than Santa Monica. The reason has to do with home prices. Higher prices shrink the pool of qualified buyers, which means Santa Monica and Malibu beachfront homes stay on the market longer before going under contract.
2. Supply: Santa Monica currently (and historically) has a lower level of housing market supply when compared to the demand from buyers. In contrast, Malibu typically has more than enough houses for sale, relative to the smaller number of buyers in that city.
3. Vibe: What’s the difference between Malibu vs Santa Monica housing? Malibu is a unique market known for its celebrity residents and ultra-luxury properties. It’s mostly suburban, with some areas that almost feel rural. Santa Monica, on the other hand, offers a wider range of housing options with a mix of residential and commercial areas.

Ultimately, both Malibu and Santa Monica are expensive markets, and for good reason. If you plan to buy in these beachfront locations, you’ll need to look at the appropriate home loans for million-dollar properties.

Need Beachfront Property Financing?

If you’re thinking of beachfront living in Malibu and Santa Monica, we can help. Sammamish Mortgage serves all of Southern California and offers a wide range of financing, including multi-million-dollar jumbo loans. Visit our website to get an instant rate quote, or contact us with your financing questions or to apply for a loan.