High-End Homeowners Get Re-Fi Advantage


Jumbo mortgage loans are at their lowest levels since 2003. That trend could really help high-end homeowners lock into a better rate via refinancing, and maybe save their homes in the process.

For the uninitiated, jumbo loans are mortgage loans above $729,750, higher than the conventional 30-year fixed rate mortgage. That almost always means the interest rates that come with jumbo loans are higher than traditional mortgages, too. That’s because there’s more risk linked to higher mortgage balances, as lenders try to transfer that risk to borrowers in the form of higher rates. Lenders may also insist on bigger down payments to further mitigate the risk of jumbo mortgages.

But perhaps banks and other mortgage lenders are growing increasingly comfortable with jumbo loans, perhaps because they finally see the U.S. housing market out of sick bay. According to The Wall Street Journal, a jumbo mortgage interest rate on a $729,000 home loan not backed by either Fannie Mae (Stock Quote: FNM) or Freddie Mac (Stock Quote: FRE) in 2009 was 6.86%. But in July, that number is down to 5.48%.

Some lenders, like Bank of America (Stock Quote: BAC) have already pushed jumbo mortgage rates down closer to 5%. Consumers are starting to notice. Citibank (Stock Quote: C) reports that demand for jumbo mortgages at the bank’s branches are up at 30% in the past two months.

A quick visit to the BankingMyWay Mortgage Loan Calculator reveals just how much you an save on a jumbo mortgage rate that’s 1 percentage point to 2 percentage points lower than it was a year ago. The math speaks for itself. For an $800,000, 30-year mortgage at 6.86%, the monthly payment would be $5,247.41.  The same loan terms at the 5.25% rate make for a monthly payment of $4,417.63. That’s a savings of $829.78 a month.

How can you get into the action and possible buy a new home or refinance an existing one with a jumbo mortgage?

  • Make sure your credit score is solid. You’ll likely need a credit score of 720 or higher to qualify for the lowest jumbo mortgage rates.
  • Be prepared for a tough appraisal process. Some banks may require two appraisers to visit your home if you’re buying or refinancing. As stated above, jumbo loans are a higher risk for lenders, so they’ll be cautious about getting the right value for your home.
  • Have a big down payment. A down payment of at least 20% is advisable. But know the more cash you place on the table, the better your shot at getting that good jumbo mortgage loan rate.

Getting a good jumbo mortgage rate isn’t easy, especially in this economy. But, with rates going lower, at least it’s easier than it was last year.

—For the best rates on loans, bank accounts and credit cards, enter your ZIP code at BankingMyWay.com.

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