When a homeowner has a jumbo loan, it would save them a ton of money to look into refinancing it. Of course, getting the wrong interest rates and/or loan terms can cause a greater debt and financial ruin. Thus, any homeowner who has million dollar loans need information on how to get the best jumbo refinance mortgage rates.
What Are Jumbo Refinance Loans
Both Fannie Mae and Freddie Mac can only buy and secure loans that fall within a specific limit… according to the guidelines Congress sets. These limits are often based on several factors including the living costs of the area and the range of $417,000 to more than $700,000.
Loans that fall into these limits are seen as conforming and eligible for the conventional interest rates. However, any original loans or refinances more than these limits are seen as jumbo loans. It is possible for borrowers to buy a home with a jumbo loan and pay it down so much that it’s then considered a traditional, conforming loan at the time of refinancing.
A Brief Look At Jumbo Refinance Mortgage Rates
Homeowners need to understand that mortgage rates will vary based on the length of time on the loan and whether the rate is fixed or adjustable. These kinds of rates tend to be higher than the conforming loan rates because of the additional underwriting requirements and the possibility of nonpayment. These costs are often passed to the consumer so it’s common for lenders to charge nearly 0.5 percent premium for these kinds of loans. With higher interest rates, borrowers often pay extra dollars over the loan’s life just so they can have the large loan balance.
How To Get The Best Jumbo Refinance Mortgage Rates
When a homeowner wants to get the best jumbo refinance mortgage rates, they should have great to perfect credit, make or have enough income to pay back the debt and have a low debt to income ratio. Borrowers can also take advantage of the refinancing if they take an amount for less than what the property is valued at. This will lead to a lower loan to value ratio, which can reduce the jumbo refinance mortgage rates.
If borrowers pay points at the beginning, they can reduce their jumbo refinance mortgage rates. Every point symbolizes one percent of the loan. Lenders tend to allow two points paid when closing on the loan. Borrowers also need to remember that the Internal Revenue Service treats paying points for bringing down the interest rate on a refinance differently than they do on a home purchase.
A Look At Interest Only Jumbo Refinance Mortgage Rates
Borrowers whose income vary or have an expectation of staying in their home for so many years can choose the ever-popular interest only jumbo refinance. This means for a period of time, the borrower will pay just interest on the loan, which can drastically reduce the monthly payments. When the pre-determined time comes about, the refinanced loan payments will increase and count toward both the interest and principal amount.
The biggest benefit to this kind of loan is that the money saved can be used somewhere else, as the payments are rather small in the beginning. Of course, the downside is that there is no equity going into the home while these payments are made and the boost in payment amounts can cause homeowners severe anguish down the road.
Lenders generally offer a variety of loan terms and option in the hopes to gain business. Borrowers need to understand the impact this kind of refinancing option, especially if they’re dealing with a jumbo refinance interest only loan or high jumbo refinance mortgage rates. It’s always in the homeowners’ best interest to look around and compare the different jumbo refinance mortgage rates and pick a program that gives them a better standing financially than when they began.