What Is Jumbo Refinance and Is It Right You?
The current real estate market is more stable than it has been in years. That means it is could be the perfect time for you to take advantage of the competitive interest rates and flexible terms lenders are offering.
For jumbo mortgage holders, this is especially excellent news, because this might be the best time to refinance and enjoy lower interest rates and reduced monthly payments sooner than you thought.
What is a jumbo refinance?
A jumbo refinance is the act of taking out another loan, that has better terms and rates, to replace your current jumbo loan. You will use the new loan to pay off your original one, and be left with lower monthly payments.
The whole essence of a jumbo mortgage refinance is to get a low-interest rate that can reduce your monthly payments and help you save. That is why it is best to shop around for a lender with the lowest rate possible. While that might be an uphill climb for any mortgage holder, we here at Mortgage Right have connections with lenders who offer the most competitive interest rates in the market. Talk to us, and we will help you score the best deal for your jumbo refi.
Advantages of jumbo refinancing
- Reduces interest rate charged on your jumbo mortgage may reduce the monthly payments as well.
- Allows you to pay off other expenses or save, since you won’t be spending as much of your earnings on your mortgage payments.
- Allows you to adjust the term of the mortgage by shortening the duration you agreed upon for the initial loan.
- Although rare, some lenders also allow borrowers to refinance a fixed-rate jumbo to an adjustable-rate one. If you have a lot of income it’s easier to pay off an adjustable-rate mortgage, especially when interest rates drop.
- Although jumbo rates are generally higher than the rates charged on conforming loans, refinancing allows you to enjoy rates that are closer to those charged on conforming mortgages.
- Refinancing doesn’t necessarily require a large down payment. You can do it with as little as 10% down.
Requirements for a jumbo refinancing
Compared to refinancing conforming loans, a jumbo refi can be a little bit challenging. There are various requirements to be aware of before being considered for the loan.
Here are some of the requirements:
- Credit score – lenders will usually take your credit score into account before deciding whether to give you a refinance. Having a good credit score of at least 660 gives you an upper hand at securing better rates. However, if you have less than perfect credit, you may still be eligible for refinancing. It is still possible to be approved with a score of 580 if you can meet other requirements like proof of income.
- Income – lenders would want to know that your income is sufficient and stable. The exact requirement varies from one lender to another, but you may need to provide income stubs as proof. This will help the lender determine whether you are in a position to repay the loan. A low debt-to-income ratio will also help your case in a big way.
- Down payment – you will be required to make a down payment once your loan application has been considered. The specific percentage can vary, but it is not uncommon for lenders to only require as little as 10%.
- Assets – any other assets you have may be taken into consideration during your application process. This will help the lender know whether they have something to fall back on in case any repayment issues arise.
Should you refinance your jumbo mortgage now?
The short answer is yes. Mortgage rates are much lower than they have been in years. For most borrowers, this means that you’ll be able to enjoy real money saving benefits from refinancing. This is especially true if:
- You have been making your mortgage payments on time
- You have a good credit history
- You have a consistent income
Having familiarized yourself with the requirements lenders look for before deciding whether to give you a refinancing loan, you’re in a good position to consider a refi. When you start the process, remember to keep these things in mind:
- The lender – before taking a jumbo refinance, it is smart to shop around for lenders, or work with a company like Mortgage Right that will do this for you.
Find out which lender has affordable rates and one that gives you an ample time to pay back. Start by looking for the lender who will offer you lower rates. You may start with your existing lender or any other mortgage broker that has rates that will enable you to refinance your loan with the convenience you need.
- Timing – are the interest rates currently high or low? The best time to do a jumbo refinance is when the interest rates have dropped. This will ensure that you get the best deal and save the most money on your monthly payments.
- The amount owed – if you have repaid your existing jumbo mortgage to the point that the outstanding amount is within the conforming limit, then you most likely should refinance it. Your new interest rate will be the same as that charged on conforming loans, which is typically much lower than jumbo rates.
- Find out how much you are likely to save – remember there are cost involved in refinancing a mortgage, and the money you save should be considerably more than the cost it takes to process your application. In some cases, the closing costs of a mortgage loan can be so high, that a refinance doesn’t actually lower your monthly payments. In this case, it wouldn’t make sense to refinance.
Is this the right decision for you?
There is no questions that now is a good time to look into refinancing possibilities. For more information, analysis of your situation, and a definitive answer if a jumbo refi will save you money, contact us at Mortgage Right today.
We’ll work with you to get the answers to those questions and any others you have.