With mortgage interest rates so low, it’s a great time to refinance. This can be especially true if you have a jumbo mortgage loan.
With mortgage interest rates so low, it’s a great time to refinance. This can be especially true if you have a jumbo mortgage loan: Bigger mortgage = bigger savings when you refinance. With the 30-year rates for jumbo mortgages averaging right around 5.3% to 5.5% and the 15-year refinance rate at less than 5%, you could really save – especially if you bought when jumbo mortgage rates were above 6%.
Difficulties Associated with Jumbo Mortgage Refinance
Not all lenders are prepared or willing to do these non-conforming loans. A conforming loan is one that “conforms” – or adheres to – the underwriting guidelines set forth by government sponsored enterprises such as Fannie Mae and Freddie Mac. The conforming loan rate is $417,000 right now. Anything more than that is considered a jumbo mortgage and doesn’t have the same backing by a government sponsored enterprise. In some areas considered high-cost, though, you might not be considered as having a jumbo mortgage unless the amount is higher than $729,250.
Because lenders are dealing with such large amounts in jumbo loans, they are taking on a big risk. That’s a lot of money to lose if you end up defaulting on your jumbo mortgage loan, and to compensate for that risk mortgage rates for jumbos are typically higher than for conforming loans. The market for jumbos, however, has eased up in recent months. Smaller and regional lenders have actually been originating more jumbo mortgages recently, according to a November, 2010 article by M.P. McQueen in the Wall Street Journal . One way to reach these lenders is through a company like LendingTree, which connects you with multiple lenders from around the country. Have a good credit score is also important to getting the best refinance rate for your jumbo loan.
Advantages of Refinancing Your Jumbo Mortgage
The main advantage to refinancing your jumbo loan is that you can save a great deal of money over the life of your loan. Let’s say you have a mortgage balance of $450,000 at 7%. Using a refinance calculator. you can figure what would happen if you qualify for a new interest rate of 5.5%, and you refinance for a 30-year term. Your new payment would be $2,555.05 a month, instead of $2,993.86. If you refinanced for a 25-year term instead, you would pay $2,763.39 a month. You’d still save money each month, and you would save even more in interest over the life of the mortgage.
Another way you can benefit from refinancing your jumbo mortgage is if you have paid down enough of your principle so that the balance is below the conforming amount. If you have paid down your jumbo loan far enough, it is no longer jumbo. This means that, instead of refinancing your mortgage as a jumbo loan, you can refinance it as a conforming loan. This will provide you with more options when it comes to choosing a lender, as well as give you access to even lower interest rates.
If possible, it is a good idea to consider refinancing your jumbo loan. Experts expect mortgage rates to rise over the course of the next year, and you may not have the chance to save money with these low rates again.
Miranda Marquit is a journalistically trained freelance writer and professional blogger. She contributes to several personal finance web sites, writing on topics such as budgeting, home loans and mortgages, and investing.
Thinking about a refinance or obtaining a new home loan? Learn more about your options at the LendingTree Smart Borrower Center and crunch some numbers on our loan calculators. Or simply fill out this refinance form or new home loan form and we’ll match you with up to four lenders so you can compare loan offers.