A non-conforming refinance loan or jumbo refinance loan does not meet the conventional loan guideline requirements set by government-sponsored enterprises, Fannie Mae and Freddie Mac. Jumbo Refinance loans exceed the maximum loan amount allowed and are harder to obtain in today’s market.
There are different types and reasons to refinance jumbo loans:
- Rate and Term jumbo refinance – a jumbo rate and term refinance either (a) converts and adjustable rate mortgage (ARM) to a fixed-rate or (b) lowers the current interest rate, resulting in lower monthly payment and savings over the life of the loan.
- Home Equity jumbo refinances – allows the borrower to take out a new jumbo loan amount than the current one and have the difference paid to the borrower at closing. The borrower taking advantage of home equity jumbo refinance use the extra money for home improvement, debt consolidation or investing the equity pulled out to other investment tools.
- Custom line of credit – Just like the home equity jumbo refinance, refinancing a jumbo loan to a custom line of credit is used to pay other important expense. The borrower can use the line of credit to pay for college tuition, pay medical bills, do home improvement or use the money for other investments.
Areas of consideration:
Interest rates are usually higher on jumbo refinance loans compared to conforming loans. They are usually available in a variety of form: fixed rate and adjustable rate loan options. There’s also the interest only loans or temporary buy-downs.
With interest only option loans, a borrower cannot build equity through the monthly interest-only payments. In order to build equity, a borrower has to make voluntary principal payments during the interest-only period when making payments.
The line of credit has a variable interest rate which may increase or decrease the monthly payment as interest rates fluctuate. The borrower can convert a portion of, or all of the outstanding line-of-credit to a fixed rate amortized in 5 – 20-year term.
For more information about refinancing your jumbo mortgage loans, contact our Home Loan Specialists at 281-860-2533.