What exactly is considered a jumbo refinance?

Welcome to the big leaves of home mortgage refinancing. This kind of refinance is when a mortgage exceeds the conforming limit set by Fannie Mae or Freddie Mac. These federally chartered institutions provide funding to retail mortgage lenders. The limit is adjusted annually based on average home prices.

For 2007 the limit for of these refinances was $420,000 for one single family home in the CONUS. If the increase has caused your loan to now qualify as conforming then you may have a possibility of benefit from refinancing.

This is mostly due to mortgages over the conforming limit will carry a slightly higher rate than conforming loans involved in a jumbo refinance. For a 30 year fixed rate mortgage you would most likely be paying about one eights to one quarter of a percent more although in some circumstances rate can be dramatically higher. The reasons for these higher rates are that jumbo mortgages carry an extreme amount more of risk to the lender and usually invovle extra underwriting which costs are in the end and as usual passed on to the home owner seeking the jumbo refinance.

The conforming limit for 08 is the exact same as it was in 06 however in 06 the limit saw a 15% increase over 2005 the largest ever jump in a single year in reference to jumbo refinances.

Their is an easy example for you in consideration of a jumbo refinance: If you took out a 400k fixed rate mortgage at 6% when a loan for that amount was considered a jumbo, If you refinance today your mortgage would no be well under the conforming limit and you would be able to take advantage of the lower for a 30 year fixed rate mortgage lowering your rate to 5.75% works works out to almost 64 every month reducing it by half a percent would save over 125 a month.

Remember that refinancing involves costs of its own and incurring these costs for a very small reduction in the interest rate may not be worth it, for some borrowers however refinancing from a jumbo to a conforming mortgage can save thousands of dollars over the long term.

Author: Ian Parks
Article Source: EzineArticles.com
Provided by: Cool mobile gadgets

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