Tuesday, June 15, 2010

Refinancing Jumbo Mortgages Made Easier

Are you sick of all the advertisements proclaiming that interest rates are under 5%, when you can’t get anything lower than 6.5%? Jumbo lenders feel your pain, and there may be a way around it.
Your Big Fat Mortgage Refinance
What can you do to get a lower interest rate today on a jumbo mortgage?
First, look up conforming and FHA loan limits in your area. You might be pleasantly surprised.Depending on where you live, you may be able to get a jumbo conforming loan from Fannie or Freddie or an FHA mortgage with a better interest rate. Conforming mortgage limits in higher cost areas range from $721,050 in Honolulu, HI to loans from $426,650 in Providence, RI.
But you should also consider FHA. FHA limits may be higher than conforming limits in some locations. If you live in Alameda County, CA, you can get an FHA loan up to $729,750, but only $625,500 with Fannie Mae. And if you have a duplex, triplex, or fourplex, your limits go way up.
Supersize a Jumbo Hybrid ARM
Jumbo 30-year mortgage rates are so much higher than comparable hybrid ARMs, which may be fixed for three, five, seven, or ten years. On a $625,000 mortgage, you may find a 30-year fixed jumbo interest rate at 6.5%, but a 5/1 hybrid is at only 5.25%. The 5/1 payment is only $3,451, $499 less than the 30-year payment of $3,950. Over a five-year period, you’d save almost $30,000. Or you could put your savings toward principal reduction and lower your mortgage balance by an additional $33,000 over 5 years.
Mortgage Refinancing: Two Loans Are Better than One?
Refinancing one loan with two loans?! Why? You might get a better deal by combining a conforming first mortgage with a second mortgage. Do some calculations to see if this makes sense, for example: a homeowner has a $525,000 jumbo mortgage and lives in Baltimore, where the conforming loan limit is $494,500. With a $494,500 first mortgage at 5% and a second mortgage of $30,500 at 8%, the blended rate is 5.17%.
In addition, home equity lines are typically much cheaper to process than traditional refinances. So if you save a couple of points on $30,500, that’s another $261 for you.
Watch Out for Fees When You Refinance
If you last shopped for a mortgage a couple of years ago, there have been changes. The advertised conforming interest rates you see aren’t always what you get. Fannie Mae and Freddie Mac add risk-based pricing adjustments, and unless you have a lovely credit score and a low loan-to-value ratio, a conforming mortgage rate might not be any better than refinancing a mortgage with a jumbo lender.
Mortgage Modification Might Help
Making Home Affordable modifications are available up to $729,750. If your jumbo mortgage is causing you hardship, you could qualify for a modification. Check your eligibility and then contact your lender.
Jumbo mortgage refinancing can be slightly more complicated, but the payoff is bigger too. A small improvement in your refinance rate equals greater dollar savings on larger loans.


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