Jumbo Mortgage Rates: When It's Time To Refinance

If you own an expensive home, you probably already know that jumbo mortgage rates are usually higher than interest rates for conforming conventional home mortgages. A jumbo rate mortgage is the type of mortgage where the loan amount of the home is above the industry standard definition for conforming loan limits. These limits are set by the country's two largest secondary market lenders, Fannie Mae and Freddie Mac, at present, the industry standard for conforming conventional home mortgage is $417,000 in the continental United States and $625,500 in Alaska, Hawaii, Guam and the US Virgin Islands.

Why Jumbo Mortgages Are More Expensive
Generally higher loan amounts carry a higher risk for the lender. Banks have more to lose if you default on a jumbo mortgage loan. Therefore, banks offset that additional risk by charging a higher interest rate. Their higher investment return allows them to extend home loans to a riskier clientele.

Another reason that banks charge higher interest rates for jumbo home mortgage loans is that these types of homes can be difficult to sell – especially, during times of a depressed economy or a poor housing market. Expensive luxury homes are vulnerable to large market variances.

Furthermore, many banks and lenders will also require a higher down payment for people seeking to buy a home with a jumbo home mortgage loan. A conventional conforming home mortgage may require a 5 percent down payment, most banks will require a down payment of 10 to 15 percent for jumbo mortgage home loans.

Most banks and lenders will also usually require two appraisals on the home -- before extending the home mortgage loan. The cost to do this loan is therefore higher because two appraisers must be paid, instead of one. Also, lenders are very selective about the appraisers that are approved to complete jumbo appraisals, and only allow a select few on their approval lists.

Typical Rate Differences
Jumbo home mortgage loans generally carry interest rates that run about .50 percent to 1.25 percent higher than conventional conforming home mortgage loans. However, some lenders charge a little more or less than the amounts that are described here.

As with any other type of home mortgage loan, you should always try to find the best rate available to you for a home mortgage loan. You should research as many lender and mortgage rate options as possible, before you make a decision or apply to a particular bank or home mortgage lender. There are many excellent sources on the internet that can help you in your search, and you should probably start with your favorite internet search engine.

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