The average cost of a 30-year jumbo mortgage hovered near a record low this week at 3.50 percent in Bankrate’s survey. That rate rose 1 basis point from last week and is just short of its lowest-ever record of 3.48 percent, achieved earlier this month.
Whether you need a jumbo mortgage in some way has more to do with the market where you’re buying than your choice as a consumer. In most areas of the U.S., a jumbo mortgage is any single-family home loan valued at $510,400 or more. The low-end threshold for a jumbo mortgage jumps to $765,600 in more-expensive areas.
You can also buy your way out of a jumbo mortgage on any value home if you put enough down. If you can stay within the conforming loan amount for your area, those mortgages averaged a much-lower 3.06 percent this week in the survey.
Jumbo home loans can be harder to secure because they can’t be bundled into mortgage-backed securities and sold off to government agencies like Fannie Mae and Freddie Mac. Instead, jumbo lenders keep these loans on their own books or sell them off to private investors.
Jumbo mortgage originations took a tumble during the beginning of the coronavirus pandemic as lenders tightened standards for borrowers, according to Mortgage Bankers Association data, but refinancing opportunities have remained strong. As with most mortgage products these days, new jumbo loans are still a good deal for the borrowers who are seeking them.
“We are seeing demand across both jumbo and conforming mortgages remaining high as customers are realizing savings with interest rates at or near historic lows,” said Pete Boomer, a mortgage executive at PNC Bank. “We are also seeing portfolio customers inquiring about the ability to modify their interest rates and payments rather than refinancing.”
Another plus for jumbo mortgage refinancing is that they won’t be affected by the FHFA fee, set to be implemented on all refis beginning Dec. 1.
“Jumbos are exempted from the fee and this should keep the refi boom going in markets with values of $600K or better. Thus, the better off (ie, higher priced property owners) benefit from this decision relative to the less better off (ie, lower priced property owners),” Ken H. Johnson, associate dean of graduate programs at Florida Atlantic University’s College of Business said in an email. “This decision by Fannie and Freddie is not playing well with consumers as it seems to be a tax on those that can least afford it.”
Jumbo refis are currently trending slightly higher than originations, at 3.60 percent.