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A Beginner’s Guide to Jumbo Refinancing👉 Did you buy a home in 2023? Refinancing might save you money — mortgage rates are down a percentage point compared to last year’s peak. See mortgage rates this week and try our refinance calculator to see how much you could save.
How to refinance a jumbo loan
NerdWallet’s mortgage rate tool can help you find competitive jumbo loan rates. At the top of this page, enter a few details about the loan you’re looking for, and you’ll get custom rate quotes in seconds without providing any personal information. From there, you can start the process of getting preapproved for your jumbo refinance.
Confirm that you need a jumbo loan
A jumbo mortgage is any mortgage for an amount above the conforming loan limit, which is updated annually and varies by location.
Depending on the amount you're refinancing, you may be able to use a conventional refinance, even if you started out with a jumbo loan. If you've paid down a large chunk of your mortgage and aren't looking to take out cash, you might find yourself below the conforming loan limit for your area.
Verify that you meet the requirements for refinancing a jumbo loan
Like all nonconforming loans, jumbo loans aren't subject to regulation by a government agency. That means lenders can set their own rules for minimum credit scores, debt-to-income ratios and other loan requirements.
Here are some of the general requirements you can expect when trying to get a jumbo refinance:
Healthy credit score. A credit score of 640 is about as low as you could go with a jumbo loan. Depending on the loan's characteristics, the minimum required score could go as high as 720.
Low debt-to-income ratio. For a jumbo refinance, your DTI usually can't be more than 43%, and is preferably closer to 36%. That means all your monthly debts, including your mortgage payment, divided by your gross monthly income should come out to a ratio of less than 43%.
Substantial cash reserves. With a jumbo loan, lenders don't have another agency to fall back on if you default. To protect themselves, lenders will often ask for proof that you have substantial cash reserves that could pay the mortgage in a worst-case scenario. You might need to show you could make up to a year's worth of payments with the cash you have on hand.
Home appraisal. You may be required to get a home appraisal, depending on the lender and type of refinance.
Jumbo refinances also tend to undergo more scrutiny in underwriting because of their size and the risk to the lender. Expect to provide documentation of all of your income, going well beyond the standard W2 if you're self-employed.
Pros and cons of refinancing a jumbo loan
The decision to refinance a jumbo mortgage is similar to refinancing a conforming loan, and you've got comparable options with your larger loan.
Pros
Lower payments. If interest rates have fallen significantly since you got your mortgage, you could use a rate-and-term refinance to lower your monthly payment.
Access your home equity. A cash-out refinance allows you to pay off your original mortgage with a new, larger loan and pocket the difference, converting some of your home equity into liquid cash.
New repayment terms. Your new loan will come with a new set of repayment terms, which may come with tradeoffs. For example, you could start over with a new 30-year jumbo loan — possibly lowering your monthly payments but adding more interest over the life of the loan. Shortening the loan's term would raise your monthly payments but could net you a lower interest rate.
Cons
You’ll have to pay closing costs. Jumbo loan refinance closing costs usually range between 3% and 6% of the amount borrowed.
A cash-out refinance could put your home at risk. Because you’re using your home as collateral, you risk foreclosure if you can’t keep up with payments — so be cautious about how you spend the cash.
In the final analysis, it’s a matter of thinking about your priorities and running the numbers. A mortgage refinance calculator lets you see how your monthly costs might change after a refi, allowing you to decide what will work best for you.
Learn more about jumbo loans and refinancing:
Frequently asked questions
The cost of refinancing depends on your mortgage balance. In general, you can expect to pay around 3-6% of your loan balance in closing costs. This range is affected by variables such as whether you require a new appraisal and the costs of your title search and insurance.
As of 2024, loans exceeding $766,550 are considered jumbo loans in most states. However, this figure can go as high as $1,149,825 in certain high-cost areas.
About the author: Holden is NerdWallet's authority on mortgages and real estate. He has reported on mortgages since 2001, winning multiple awards.
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