Some of my clients are asking, should I refinance my jumbo mortgage now or wait? It might not be the right move for every homeowner but it could be a smart financial decision depending on your financial goals.
Yes, mortgage rates are starting to rise. Mortgage interest rates are still low, but as mortgage rates start to rise it’s time to decide whether or not you want to refinance your jumbo mortgage. If your current mortgage is a jumbo mortgage, also referred to as a jumbo loan, a refinance could be a smart move.
If you’ve been thinking about refinancing a jumbo mortgage and you’re not sure whether to start the loan process, this short article can help.
Is Now the Time to Refinance My Jumbo Mortgage?
If you’ve been following mortgage rates then you already know that mortgage rates are slowly starting to rise. Jumbo mortgage rates are typically higher than conventional home loan mortgage rates. So the average uptick is going to float above conventional mortgage rates no matter how the market trends.
3 Quick Questions: Things to consider if you want to refinance a jumbo mortgage or jumbo home loan
- Does my current mortgage have an adjustable or fixed rate?
- Does my current mortgage balance fall below Jumbo Loan limits?
- Do I have a second mortgage or home equity loan?
Working together with your mortgage broker can help uncover other scenarios where a jumbo mortgage refinance might be a smart move. This short list can get you started.
1. Jumbo Mortgage Rates: Adjustable vs. Fixed
In general, when mortgage interest rates are low it’s a great time to lock in a fixed rate. A fixed-rate mortgage means your mortgage payments will be exactly the same for the entire term of your home loan. 30-year fixed-rate home loans and 15-year fixed-rate home loans are the most common. So if you’re still in an adjustable-rate mortgage, it’s a smart move to apply for a fixed-rate mortgage loan. Your payment and your rate will stay fixed no matter how the market is performing.
One caveat: refinancing to a fixed-rate jumbo mortgage might not be worth the cost if you don’t have much home equity built or you don’t plan on staying in your home very long. As with any new loan process, there will be fees to close the new loan. So you want to make sure the savings from the new interest rate will offset any fees you might incur to close your new loan.
2. Jumbo Mortgage Limits vs. Conventional Loan Limits
One great reason to consider refinancing your jumbo mortgage is to refinance out of a jumbo loan and into to a conventional home loan. Why?
Jumbo mortgage rates are always a bit higher than conventional home loans. If you have a high-value home and you initially locked into a high-balance mortgage (or jumbo mortgage), lenders consider these loans to be high risk. This means higher interest rates for the homeowner.
Jumbo mortgages are only determined by one thing: your mortgage balance. So even if you’re in a high-value property, once your current mortgage balance is below the jumbo limits, you could now qualify for a conventional home loan.
- Current jumbo mortgage limit threshold across most of the U.S. is $548, 250
- In more expensive areas like the San Francisco Bay Area, the jumbo mortgage limit is $822, 375.
If you purchased your home in a high-value area, with an original jumbo mortgage of $850k, and now you have a balance of $725k, you could refinance your home mortgage to a fixed-rate conventional loan with at a much lower interest rate. Even if the value of your home has skyrocketed, only the amount you decide to borrow determines whether or not it qualifies as a conventional home loan.
3. Refinancing a Jumbo Mortgage to Consolidate a Second Mortgage
A lot of first-time homeowners have second mortgages. For most homeowners, their financial situations change a lot over time. Maybe your career has taken off, or you have a home equity loan you’d like to consolidate? Maybe you have student loans or other debt you want to consolidate.
If you have substantial equity built in your home, consolidating other home loans including a second mortgage can be a smart financial move. While jumbo mortgage rates are still low, equity built in your home, and higher income, you might have a lot of new options you didn’t have before.
Working with an experienced mortgage broker makes all the difference when you’re thinking about refinancing. Specifically when it comes to your jumbo mortgage home loan, you might have a lot more refinancing options than you know about. If you’re thinking about refinancing your jumbo mortgage, give us a call. We can help.