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How to Refinance a Jumbo Loan
Jumbo loans are larger loans for expensive homes, which makes finding the best jumbo mortgage rates even more important.
Jumbo mortgage rates are interest rates for loan amounts that exceed conforming loan limits set by the Federal Housing Finance Agency (FHFA). In 2023, that limit is $726,200 for a one-unit home in most parts of the country — a loan amount above that limit is considered a jumbo loan.
For high-cost parts of the country, you’ll need to search for jumbo mortgage rates if your loan amount is above $1,089,300 for a single-family home. These limits change yearly based on increases or decreases in average U.S. home values over the previous four quarters.
The term “jumbo mortgage” typically refers to a home loan at a loan amount above the conforming loan limits set each year by the FHFA. However, it can also be a loan of any size that doesn’t fit into other loan categories. These types of jumbo loans often cater to borrowers with poor credit and may not require standard income documentation or may allow for interest-only payments.
Jumbo mortgages are also called “non-conforming loans” because they follow rules set by individual investors, rather than Fannie Mae and Freddie Mac. Jumbo lenders may offer programs on properties that are hard to appraise or for wealthy self-employed borrowers and doctors who are just starting their practices.
Lenders typically hold jumbo mortgages in their loan portfolios, which means they can set interest rates based on their own standards. Investors may price their rates based on a number of factors including credit scores, down payment, size of the loan and the location of the home.
Historically, jumbo rates have been higher than conforming conventional mortgage rates, but during periods of strong economic and housing growth, jumbo rates may actually be lower. The wide variation in rates and programs offered by jumbo mortgage lenders makes shopping around especially important.
Lenders typically set stricter qualifying guidelines for jumbo mortgages. Jumbo mortgage requirements may include:
Because jumbo loans don’t adhere to rules set by a government agency, some lenders offer niche jumbo programs for borrowers with unusual circumstances such as:
You may find big differences in 30-year jumbo rates offered by different mortgage companies, but in most cases, you’ll get the best jumbo loan rates by following these six steps:
You should compare jumbo rates for a number of reasons:
There are a few options that may help you avoid a jumbo loan rate.
Deciding between a 30-year and a 15-year fixed-rate jumbo loan comes down to how much you can qualify to borrow. The table below gives you an idea of the payment difference between a 30-year jumbo rate at 6%, and a 15-year jumbo rate of 5.5% on a $1 million loan amount.
| Loan amount | Loan term | Monthly principal and interest payment |
|---|---|---|
| $1,000,000 | 30 years | $5,995.51 |
| $1,000,000 | 15 years | $8,170.83 |
Many jumbo lenders offer adjustable-rate mortgage (ARM) options with a lower initial rate that usually lasts for three, five, seven or 10 years. After the initial fixed-rate period ends, the rate changes based on the terms of your ARM agreement.
Some jumbo lenders even offer an interest-only option for jumbo loans. Once the interest-only period ends, you pay the remaining balance in installments for the remaining loan term, which could be a shock to your budget if you don’t pay your loan balance down before the bigger payments begin.
You should consider a jumbo mortgage if you’re buying an expensive home and need a loan higher than the conforming loan limits in your area.
A jumbo loan allows you to borrow more money than conventional loan programs allow. You can keep some of your cash assets in the bank and potentially increase your mortgage interest tax write-off. One caveat: The mortgage interest deduction is capped at $750,000 for individuals but drops to $375,000 per spouse for married couples filing separately.
The amount of what is considered a jumbo loan varies depending on the part of the country where you’re looking to purchase. If you’re buying a single-family home in most U.S. counties, a loan amount above $726,200, requires a jumbo loan. In high-cost areas, that amount rises to $1,089,300.
Yes. Jumbo refinance loans work much like conventional, conforming refinances, but set stricter limits for income, credit and credit scores. One tip: Conforming loan limits change every year, so you may be able to avoid the tougher jumbo approval standards by checking the limits in your area annually.
Most jumbo loans are “manually underwritten.” A human underwriter does most of the review, instead of the automated underwriting systems (AUS) typically used for conforming loans.