It has been a tough couple of years — almost the proverbial perfect storm — for clients needing to refinance a jumbo loan.
The Great Recession(depression?) has cut home values, turning some jumbo loans upside down for borrowers. Falling values and tighter credit have made refinancing difficult and qualifying new borrowers even tougher unless they were very prudent over the last few years. Socking away money for the proverbial rainy day.
Low and no down payment and adjustable rate schemes are history. ARMs are available but clients want fixed. Why gamble with future rates when fixed is at historic lows?
But the storm may have completely passed. Across several states luxury home values have stabilized and insanely tough credit standards are being moved down to the 700 FICO score level or better, interest rates are at historic lows again, new creative loan plans are emerging and pent-up demand for high-end housing is eager to enter the market.
Cloud Computing Technology specialist David Sparks was surprised when we informed him he would be able to refinance his $1.5 million post modern-style house in Santa Monica and tap into the equity for an additional $75,000 so he could remodel his kitchen.
Sparks, refinanced his expensive adjustable-rate mortgage into a 30-year fixed jumbo mortgage at 5.125 percent.
In 2009, the average rate on a 30-year jumbo mortgage was 6.86 percent compared to 5.25 percent in November, the lowest in history. That represents a significant savings for borrowers.
For example, a homeowner with a 30-year fixed jumbo mortgage balance of $900,000 at 6.25 percent pays $5,541 a month. The same balance refinanced into a 5.00 percent jumbo loan reduces the monthly figure by $710.
The jumbo mortgage market is alive and well for well-qualified borrowers, with well-qualified being the key word if you are still paying close attention. And creditworthy consumers are waiting much longer to close their jumbo mortgages while banks pore over financial documents and complete due diligence.
Borrowers face considerably more scrutiny than they did before the epic financial meltdown that started in 2008. With 10% of jumbo mortgages at least 60 days late the focus of underwriting is finding and lending to rock solid borrowers who have survived the financial storm by being prudent with their finances.
It used to be that high-earning borrowers with excellent credit and ample cash reserves could sign a new multi-million dollar jumbo mortgage or refinance an existing loan on their posh digs with no questions asked.
Of course, that was before the economy tanked and the housing market went belly-up, making lenders skittish about financing any type of mortgage, especially since they had to hold the loans they made on their balance sheets. Return of capital became the most important element of any loan. Those that qualify are being rewarded for their prudence.
Most client’s refinancing are saving 1-2 thousand dollars a month because they are dropping their interest rates over 1%. The majority of jumbo mortgage loans funded over the last quarter were 30Y fixed. Maybe running with the herd is right once in awhile. The latest chart should really demonstrate how much money is on sale for SOLID borrowers.
And above all please get a jumbo loan that makes sense for your short and long term financial plans. If your ready to start the conversation, contact one of our seasoned advisors by visiting our main site here. As always, have a prosperous day.
And above all please get a jumbo loan that makes sense for your short and long term financial plans. If your ready to start the conversation, contact one of our seasoned advisors by visiting our main site here. As always, have a prosperous day.
