Refinancing a jumbo loan is not for the faint of heart. Prepare for demanding applications and numerous documentation requests.
But the effort to refinance a jumbo loan – a mortgage that exceeds Freddie Mac and Fannie Mae’s compliant loan limits of $ 548,250, in most cases, and up to $ 822,375 or more in some high-cost areas – may be worth it. Even a small drop in the interest rate can translate into big savings with these large loans.
Are you looking to refinance your mortgage?
Refinancing your mortgage can be a great way to save. With NerdWallet, you can easily track the value of your home and see if you can save money by refinancing.
Why refinance a jumbo mortgage?
With house prices rising home equity, many homeowners are interested in refinancing their jumbo loan to get cash. Those with variable rate jumbo mortgages may also be looking to refinance. Of course, reducing a monthly payment and an interest rate are also motivations for refinancing.
If you are considering refinancing a jumbo loan, the first step is to analyze some numbers to see if the refinancing is worth it. If so, you’ll want to understand the requirements.
Requirements for a jumbo loan refinance
Here’s what lenders and investors may charge to refinance a jumbo loan:
No More Than Four Mortgaged Properties: Many investors state that jumbo refinancing borrowers who own multiple properties cannot have more than four that are mortgaged.
No bankruptcy in the past seven years: on the other hand, your waiting period can be as short as a year with a compliant loan, depending on your lender, the type of loan, your type of bankruptcy and your situation.
Proof of cash and other liquid reserves: You may be asked to prove that you have enough cash and other liquid reserves to cover the principal, interest, taxes and insurance of the loan for several months or even a year. Depending on the investor, your retirement accounts may be viewed as cash reserves, although their value may be discounted.
“You may be asked to prove that you have enough cash and other liquid reserves to cover the principal, interest, taxes, and insurance of the loan for several months or even a year.“
To document the income for a jumbo refinance, you will need at a minimum:
Two years of annual tax returns.
60 days of bank statements.
Do you use bonuses and commissions to qualify? You will also need two years of documentation for these. If you are self-employed or in partnership, you may be asked for an income statement and balance sheet. Additionally, you should be prepared to explain and document the source of any large or unusual deposits on your bank statements.
Are jumbo refinancing rates and fees different?
Jumbo refinancing rate generally do not differ much from conforming loan rates. Your credit score and loan-to-value ratio will play a major role in determining the rate you are offered. It pays to shop around several lenders to see who will offer you the best rate: even a fraction of a basis point can make a huge difference to the lifetime cost of a jumbo loan.
Jumbo loan fees and closing costs are similar to other mortgages. But since many fees are a percentage of the loan amount, you may end up paying more on a jumbo loan refinance. Plus, there’s this: Lenders may want two appraisals – especially on mortgages over $ 1 million – potentially doubling those fees.
What is a jumbo cash-out refinance?
As home values increase, homeowners can refinance themselves to extract some of their new wealth. A cash refinancing replace your existing mortgage with a new mortgage for more than what you owe on your home. You can keep the extra amount in cash.
Banks vary in the amount of capital you can extract, and rates can fluctuate slightly from day to day and from bank to bank. So shop around for quotes, compare your offers, and find a mortgage advisor you trust. The documentation required for a jumbo refinance can be great, but your savings in the long run could be worth it.