A jumbo loan is a mortgage loan that is larger than the conventional mortgage loan, and this amount varies county to county. In most counties, a loan is considered a jumbo loan if it is higher than $417,000. Jumbo loans tend to be charged at a higher interest rate than conventional loans. Refinancing a jumbo loan is a good idea if you plan to stay in your house for many years to come and want to reduce the amount of interest paid or the monthly amount paid.
Get Your Credit Report
The first thing you need to do before you consider refinancing your jumbo loan is to look at your credit report and score. You can get a free credit report once a year from all three credit bureaus — Experian, Equifax and TransUnion by visiting AnnualCreditReport.com, a website set up by the agencies and recommended by the Federal Trade Commission. You can also pay for additional credit reports if you've already gotten your free credit report earlier in the year.
Check for Accuracy
Look through your credit report for any inaccuracies or fraudulent activity and report them to the credit bureau. Involvement with collection agencies, late payments, and unpaid bills will all hurt your credit score and reduce the chance of getting a refinance on your jumbo loan. Also, consider your debt-to-income ratio. The higher your debt is compared to your income, the less likely the bank is to refinance your jumbo loan. Paying off debt to reduce your debt-to-income ratio is a smart way to increase your chances of getting a jumbo loan refinance down the road.
Consider Your Goal
Consider your goal for refinancing your jumbo loan. If you want to reduce the monthly payments, you may have to tack years onto the life of the mortgage. If you want to reduce the amount of interest paid, you may end up paying more every month but less money over the lifetime of the loan. Read over the terms of your mortgage agreement and take note of any upcoming dates that may alter your adjustable rate mortgage, if you have one.
Assess the current value of your house. Many counties have property value information online as a matter of public record. If the house on which you have a jumbo loan is underwater, meaning that it is worth less than what you owe on it, you may not be successful in refinancing your mortgage. The bank may also want to send out their own appraiser. Call your mortgage company and ask about the options for refinancing your jumbo loan. Keep in mind that the current interest rate environment and your credit history affect on how successful you will be in refinancing your jumbo loan. If you are experiencing financial hardship, don't be afraid to say so.
Based in Chicago, Annie Wang has been writing since 2008. Her work has appeared in World Architecture News and other online publications. She holds Bachelor of Arts degrees in English and art history from the University of California, Davis.