Is Now a Good Time to Refinance a Jumbo Mortgage Loan?
For dads across the country, financial considerations are an ever-present part of our lives. One of our biggest expenses is usually our mortgage payment. This is especially true if we are carrying a jumbo mortgage loan. Refinancing can help you realize significant savings – but when should you consider refinancing a jumbo mortgage loan? Below are some things to keep in mind when determining if now is a good time for you to refinance or not.
Low Interest Rates
The constantly changing interest rate that lenders offer on mortgages is a key consideration when thinking about refinancing. While interest rates on jumbo mortgages tend to run .25% to 1% higher than conventional mortgages, they fluctuate just as often, and to more or less the same degree. If rates now are significantly lower than when you bought your home, refinancing may be a great way to put some extra money in your pocket every month.
Type of Mortgage Loan
Rates tend to be lower for Adjustable-Rate Mortgages (ARMs) than for fixed rate loans. An ARM can be a great way to see significant savings, but be aware that after a set period, usually five or seven years, your monthly payment with an ARM can rise sharply, depending on how interest rates have changed over that time. Always consult with a lending professional or your financial advisor before deciding which type of loan is best for you.
Also, if you have been in your home for a while and have gained equity, you may be able to refinance with a conventional loan (one under $417,000) rather than a jumbo mortgage. In fact, the limit of conventional loans has gone up steeply since 2000, so it may be quite easy to reconfigure your mortgage as a conventional loan. The lower interest rates for a conventional loan can save you thousands of dollars a year!
If you do still need a jumbo mortgage, be aware that since the boom years of the early- to mid-2000s, banks have become increasingly strict about their requirements for providing or refinancing jumbo mortgage loans. In the case of a refinance, you will need to have at least 20% equity in your home. In addition, you must be able to clearly document your current income with pay stubs, tax returns, and the like.
If your financial situation is secure, you plan to remain in your home for several years, and you would like to see potentially considerable savings on your monthly mortgage payment, refinancing your jumbo mortgage loan is definitely something to consider. It might be the difference between a stay-cation and a fantastic vacation trip that your kids will never forget!