Minneapolis, MN: As mortgage interest rates continue to sit at historical lows, many homeowners have taken this opportunity as a time to refinance into a fixed rate home loan. Inevitably interest rates will rise and for this reason it makes sense to lock into a great low mortgage interest rate sooner rather than later.
While interest rates are still low compared to historical averages for all home loans, if you are looking for a fixed rate loan and you have a jumbo mortgage (loans over
$417,000 (updated: $453,100 as of 2017 ) you may have paid a higher rate than a conventional loan, which is under $417,000 $453,100 in 95% of the country and ALL of Minnesota, Wisconsin, and South Dakota (where we lend). This is because the Jumbo mortgage market is essentially a private market for mortgages, as opposed to conforming conventional loans, which are backed by Fannie Mae and Freddie Mac.
Given this fact, many homeowners who have Jumbo mortgages and are looking to lock into a fixed rate loan, are now considering paying down their mortgages to the conventional loan limit of
$417,000 $453,100 and then refinancing.
This would allow them to trade in their jumbo loan for a new fixed rate conventional loan, at a lower interest rate. The current difference between a 30-yr fixed rate jumbo loan versus a conventional loan is about 1/2%. Dropping your rate by that much can amount to huge savings over time.
Now obviously, this only applies to those who have the funds to do so, but here in Minnesota especially, there are many homeowners with home mortgages just slightly above the conventional loan limits. For those homeowners, it may make sense to pay down the mortgage and lock into the lower conventional fixed rate.
If you are considering refinancing your Jumbo mortgage and paying down your existing loan to a conventional loan, as always please contact a local licensed Loan Officer, not an unlicensed bank application clerk, to discuss all of your options.
This pay down options isn’t right for everyone, but for many homeowners it could be a wise decision to lower your loan balance and lock into a low fixed conventional loan rate.
An original article by Joe Metzler (C) 2012 Metzler Mortgage Group iMortgageJoe.com