The limit for conventional home loans is set by two government-sponsored organizations—Fannie Mae and Freddie Mac. The current conventional mortgage limit is $417,000 and when a potential homeowner takes out a loan that exceeds the conventional limit to pay for a home, the loan is considered jumbo. Let’s take a look at potential risks and benefits you may experience as you refinance home mortgages that are larger than conventional ones.
Jumbo Loan Mortgages: Rates and Risks
Jumbo loan interest rates are higher than conventional loans because of their risk factors. They are used to purchase luxury homes, which are harder to resell at full price. If a loan defaults or a borrower needs to move, potential financial loss is great for both the lender and borrower depending on how much the home can be resold for and how much equity the borrower possesses.
Jumbo Loan Mortgages: Benefits
If you are looking to refinance mortgage rates on a jumbo loan, there are many potential benefits depending on how long you are thinking about staying in your home. Refinancing a jumbo mortgage can reduce the amount of interest you pay on a home loan.
- ARM to Fixed: It may be a good idea for you to refinance mortgage rates on your home if your loan has a variable interest rate. When market rates and prices are down, it is a good idea to get an interest rate that won’t skyrocket if and when the market boosts. Also, ARM rates traditionally are lower than fixed rates in the short run, but tend to spike with time. You may get a fixed rate that is a little bit higher than an initial ARM rate, but if it saves you money in the amount of interest you pay in the long run, take it.
- Changes in Conventional Limits: If you took out a loan that was previously considered jumbo, but would now be considered conventional, you may be able to lower your interest rates if you refinance your loan with a conventional mortgage.
- Market Flux: When market rates and prices are down, refinancing a mortgage is always worth taking a look at. You may be able to refinance a mortgage with lower fixed interest rates, which will speed up the time it takes for you to build equity in your home.
Save Yourself from Dirty Tricks and Junk Fees
RefiAdvisor exists to expose the tricks some mortgage brokers use to extract money from innocent homeowners who simply want to save money. I’m a guy that got burned on refinancing a mortgage and am now committed to getting back at dirty brokers by helping homeowners save thousands in junk fees when they refinance home mortgages. If you are thinking about refinancing a jumbo mortgage, sign up for RefiAdvisor’s FREE six-part video series to learn all you need to know about saving money and getting great interest rates on a refinanced mortgage.
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