Jumbo Refinance Rates

The average jumbo refinance rate has hovered around 3% since the beginning of the COVID-19 pandemic, according to historical data from the Federal Reserve Bank of St. Louis.

Recent jumbo refinance rates are higher than the historic lows set in December 2020, when the 30-year fixed rate for jumbo mortgages sat at approximately 2.812%.

The rates can be lower if you’re comfortable with adjustable-rate mortgages, your rate can potentially be less. However, your future rates can adjust higher and offset your initial interest savings.

The following table shows how recent 30-year jumbo mortgage rates compare to previous years. The rate listed is the rate that was recorded on the final day of November in the respective year:

While mortgage rates are trending upward, they still remain near historic lows. As a result, now might be a great time to refinance a jumbo loan.

The lowest 30-year fixed jumbo mortgage rate was recorded on Dec. 21, 2020 at 2.812%, according to the Federal Reserve Bank of St. Louis.

The best refinance rate — regardless of whether it’s a jumbo loan or not — is one where you can lower your interest rate by at least one percentage point. This allows you to break even on your closing costs in a reasonable period of time and provides enough monthly savings to make the whole process worth it.

Recent rates are at least a full percentage point lower than the highs of just over 5% in October 2018. So, if you took out a jumbo loan around then, now would be a good time to refinance.

As jumbo refinance rates trend higher, it’s vital to compare rates from multiple lenders to ensure you’re getting the best possible rate. You can quickly compare personalized rates, monthly payments, and fees on jumbo refinance loans with Credible in just a few minutes. Checking your refinance rates and terms with us is free and won’t affect your credit score.

Several economic and personal factors influence your mortgage rates. The 10-year Treasury bond yield is one of the most significant variables as rising yields tend to indicate higher refinance rates.

Typically, rates are lower when the economy is weakening, unemployment is rising, and mortgage demand is declining. However, rates can rise due to strengthening economic conditions or an uptick in inflation.

You can take several steps to qualify for a lower jumbo refinance rate:

• Credit score: Lenders usually require you to have an excellent credit score — 740 or higher in most cases — to be eligible for the best rates. You can still qualify for a competitive rate if your score is in the upper 600s to lower 700s. Find out ways to improve your credit score before applying.

• Cash reserves: With jumbo loans in particular, lenders want to see you have good cash reserves. You should disclose your available savings and non-liquid assets so that your lender can determine if you have enough money to refinance.

• Debt-to-income ratio (DTI): Your lender may only allow a maximum DTI ratio of 43% for a jumbo refinance. As you’re borrowing more money than a conforming loan, your income will also need to be higher.

• Repayment term: Loans with shorter repayment terms generally have a lower interest rate but your monthly payment will be larger.

• Closing costs: Paying your origination fees and closing costs upfront instead of rolling them into your loan can lower your lifetime interest costs. Your loan estimate will list all of your closing costs so that you can decide if it’s worth buying points or rolling some of the costs into the loan.

• Home equity: Your lender may require a loan-to-value ratio (LTV) of 80% or less before you qualify for refinance. It’s possible to get a cash-out refinance and remain below the 80% LTV ratio, but your loan APR might be higher.

Jumbo loan rates are typically higher than mortgage refinance rates that meet the FHFA conforming loan limits. The following table shows what the APR might look like on a jumbo loan vs. a conforming loan.

In addition to looking for the lowest interest rate, you should also compare your monthly payments. You may want to choose the highest payment that you can comfortably afford to minimize your lifetime interest costs.

However, it’s also important to weigh your other financial priorities. Refinancing to get a lower rate and monthly payment but keeping the same repayment term can be sufficient if you simply want to free up more cash for other expenses.

Here are some of the advantages of refinancing a jumbo loan:

• Reduced interest rates: You can potentially qualify for a lower interest rate that can immediately reduce your monthly payment.

• Fixed monthly payment: By refinancing an adjustable-rate loan to a fixed interest rate, you can secure the same interest rate and monthly payment for the entire repayment period.

• New repayment term: You can either shorten or extend your repayment period to fit your financial situation. A shorter term minimizes your lifetime interest costs.

• High borrowing amounts: Jumbo mortgages allow you to finance a more expensive property if you live in a high-cost area.

There are also several disadvantages to be aware of, including:

• Higher interest rates: Refinance rates on jumbo loans tend to be higher than rates on conforming loans due to the additional risk posed to the lender.

• Closing fees: You’ll pay a variety of origination fees and appraisal costs, just like you did on your first mortgage. These fees are usually between 2% and 5% of the loan amount.

• Stricter requirements: It’s harder to qualify for jumbo loans than conforming loans as lenders often have more restrictions. You may need a higher income, deeper cash reserves, and a lower DTI ratio, for instance.

• Cash-out restrictions: Your lender might impose limits on the amount of money you can take out with a jumbo cash-out refinance. The interest rates on these types of refinance loans might also be higher.

Jumbo refinance rates, like traditional refinance rates, will be different for each repayment term. In general, the shorter your term, the lower your rate.

Besides a different refinance rate, your repayment period will also determine your new monthly payment amount and total interest costs. While longer terms generate more interest, your monthly payment is smaller. Thirty-year mortgages are the most popular home loan option primarily because they offer these budget-friendly payments.

Here are the costs for two hypothetical jumbo loans — both valued at $700,000. You can see how much you’ll save in interest by opting for the shorter term.