Refinancing a Jumbo Loan in 2024: What You Need to Know
Refinancing a jumbo loan isn't always as simple as refinancing a conforming mortgage.
Not all lenders offer jumbo refinances, and those who do will likely have higher lending standards than for smaller balances.
But refinancing a jumbo mortgage – and getting the best interest rate possible – doesn't have to be a challenge.
Speak to a lender to see if you qualify for a jumbo refinance.
Why Are Jumbo Refinances More Restrictive?
A jumbo refinance is any refinance loan that exceeds conforming loan limits. The Federal Housing Finance Agency (FHFA) adjusts these limits annually to remain in line with housing costs.
For 2024, the conforming loan limit for a single-family home is $766,550 in most areas of the United States. In high-cost locales, this limit is as high as $1,149,825.
Unlike conventional loans, which lenders sell to Fannie Mae and Freddie Mac, jumbo refinance loans are often retained by the lender or sold to investors.
Plus, the government doesn’t offer guaranteed protection in the event of default on jumbo loans.
As such, jumbo loan refinance requirements are more restrictive than for smaller mortgages. You can also expect a more in-depth underwriting process.
Jumbo Loan Refinance Guidelines
Conventional and government-backed mortgages establish guidelines for lenders. For jumbo loan refinances, there is no single set of rules. As a result, every lender has their own requirements and restrictions regarding high-balance mortgages.
While not set in stone, some jumbo loan refinance guidelines you'll likely encounter include:
Credit Score
If you’re refinancing your existing mortgage with a new jumbo loan, expect most lenders to require a credit score of at least 680. Many look for scores of 700 or above, especially with higher-value properties.
Homeowners refinancing a jumbo loan on a second home or investment property or with multiple other financed properties may require a score as high as 740.
Debt-to-Income Ratio
Your debt-to-income (DTI) ratio is calculated by dividing your recurring debt obligations by your qualifying monthly income. Some of the common bills included in your DTI calculation are:
Mortgage payments
Auto payments
Credit card minimums
Student loan payments
Few jumbo lenders will approve a refinance if your debt-to-income ratio is above 45%. However, you can expect many to have maximums of 43%. Some, especially for higher-balance and lower-equity mortgages, may have a target as low as 36%.
Loan-to-Value Ratio
Your mortgage's loan-to-value (LTV) ratio is the percentage of your home's appraised value that you're borrowing. If your property is worth $1.25 million and you’re applying for a $1 million jumbo refinance, your LTV is 80%.
Jumbo loans typically require a minimum of 10% equity for a rate-and-term refinance. This is a 90% LTV. Some lenders may only lend up to only 80% of a property's value.
Cash-out refinances have a stricter requirement, and the pool of lenders offering them on jumbo loans is even smaller. Expect mortgage companies to require anywhere from 25% to 35% of remaining equity – a max LTV of 65% to 75% – to be eligible for a jumbo cash-out refinance.
Required Reserves
Jumbo lenders often require borrowers to show proof that they have enough funds to cover their mortgage for a set number of months after closing. This amount is called the required reserve and includes monthly principal and interest payments, taxes, and insurance costs.
You can expect to need at least six months of mortgage payments in reserve for jumbo refinances. With some lenders and for higher-risk loans, the required reserve can be as much as 12 or even 18 months' worth of mortgage payments.
Fixed-Rate vs Adjustable-Rate Jumbo Mortgages
Jumbo mortgages come in fixed-rate and adjustable-rate varieties. Compared to conforming loans, however, more lenders offer adjustable-rate options.
Adjustable-rate mortgages (ARMs) have an initial fixed-rate period during which you can expect stable monthly payments. The length of this period depends on the mortgage, but it typically ranges from three to ten years. Afterward, most loans have rates that adjust annually.
If you currently have an adjustable-rate jumbo mortgage nearing the end of its introductory period, refinancing to another ARM lets you lock in a new rate – often lower than with fixed-rate loans – for multiple more years.
Homeowners seeking a stable and predictable payment should look into a fixed-rate mortgage in terms ranging from 15 to 30 years.
Do You Still Need a Jumbo Mortgage?
Just because you currently have a jumbo mortgage doesn’t mean that you’ll necessarily need to refinance into another jumbo loan. In many cases, homeowners with an existing jumbo mortgage are eligible for a conventional loan due to:
Increases to conforming loan limits
Reducing their principal balance since taking out their loan
The FHFA increases the maximum conforming loan limits every year to align with changes in the real estate market. If your jumbo loan balance is below the current limit, you won't need to apply for a new jumbo mortgage.
In most areas of the country, the maximum conforming loan limit for a single-family home is $766,550 in 2024. However, if you live in a high-cost area with elevated home prices, you may be eligible for a conventional refinance for as much as $1,149,825 on a single-unit residence.
With a four-unit residential property, it’s possible to get a conventional loan for over $2.2 million in certain markets.
You can use the Fannie Mae AMI Lookup Tool to check out your area's maximum conforming loan limits.
Note: Conforming loan limits represent the maximum amount for your mortgage – not your home’s appraised value. If the amount you want to borrow is below the limit, you can apply for a conventional loan regardless of your home’s full value.
You can even use a cash-in refinance to pay down the principal to conforming limits.
Qualify for a VA Cash-Out Refinance?
Unlike conventional and other government-backed mortgages, loans secured by the Department of Veterans Affairs have no maximum loan limits. If you qualify for a VA Certificate of Eligibility with full entitlement, you can replace your jumbo loan with a VA cash-out refinance.
VA loans are backed by the federal government, meaning you can expect lower rates than other jumbo mortgages.
It’s worth noting, however, that VA loans do have a VA funding fee. For first-time borrowers, this equates to 2.15% of the loan total for a cash-out refinance. If you’ve obtained a VA loan in the past, the funding fee is 3.3%.
As with all VA loans, specific borrowers with service-related disabilities are exempt from paying the funding fee when refinancing a jumbo mortgage.
Jumbo Refinance Closing Costs
Jumbo refinance closing costs are essentially the same as those of other types of refinances. In most cases, the cost of refinancing will run between 1% and 3% of the total mortgage.
This is lower, percentage-wise, compared to smaller mortgages because some costs are fixed no matter the loan size.
Still, it’s not uncommon for jumbo closing costs to range from $10,000 to $20,000.
Some jumbo refinance lenders to require two separate home appraisals. This is due to the increased risk of large-balance loans and the limited market for high-value homes, which can make it more difficult to establish an accurate valuation.
Benefits of Refinancing a Jumbo Loan
Is it the right decision to refinance your jumbo loan? For most homeowners, the benefits of refinancing a high-balance mortgage can include:
Slashing Monthly Payments: Even a small interest rate reduction results in significant savings when dealing with a high loan balance. On a $1.5 million jumbo loan, reducing a current rate of 7.5% by just 0.25% would save over $250 per month.
Fixed-Rate and Adjustable-Rate Options: You can refinance to a fixed-rate loan for stable monthly payments or an adjustable-rate mortgage to take advantage of the low-rate introductory period.
Shorten or Lengthen the Repayment Period: Lengthening your loan spreads your repayment over a more extended period, reducing the amount due each month. Conversely, shortening your loan reduces total interest costs and helps you pay off your home sooner.
Downsides of Refinancing a Jumbo Loan
Refinancing a jumbo loan can be slightly different than conventional and conforming loans. Some of the downsides you should keep in mind are:
Fewer Lenders to Choose From: Not all lenders offer jumbo loans, and some will have more restrictive criteria than others. Depending on your financial profile and loan needs, obtaining and comparing multiple rates may take longer.
More In-Depth Underwriting Process: Unlike conforming loans, which are approved by automated underwriting systems whenever possible, jumbo mortgages almost always undergo full manual underwriting. This can take longer and sometimes require more supporting documentation than algorithm-based approval.
Closing Costs Add Up: On a jumbo loan of $1 million, costs to close could range from $10,000 to $20,000 or more.
Frequently Asked Questions About Refinancing a Jumbo Loan
Are you considering refinancing your jumbo mortgage? Here are a few of the most commonly asked questions about jumbo loan refinancing.
Is There a Waiting Period for Refinancing a Jumbo Loan?
Since jumbo loans don't adhere to specific lending standards, there is no set waiting period when refinancing. In most cases, you can refinance your jumbo loan as soon as it makes financial sense. Your current lender, however, may require a waiting period if you plan to use them for your refinance.
Should I Refinance My Jumbo Loan Through My Current Lender?
Refinancing your jumbo loan through your current lender could simplify the application and underwriting process. Still, you might not always get the best rate. Shop around with at least three lenders.
Are There Alternatives to a Jumbo Cash-Out Refinance?
Borrowers currently locked into a favorable interest rate on their jumbo mortgage or who only need to withdraw a small amount of equity may find a HELOC or home equity loan a more practical cash-out alternative.
What Types of Lenders Offer the Best Jumbo Loan Refinance Rates?
Jumbo refinance rates can vary greatly depending on your location, financial profile, and the subject property. Since jumbo loans are more likely to be held in the lender's portfolio than conventional mortgages, you can often obtain attractive rates from local banks and credit unions—especially if you already deal with them.
Conversely, large national banks that handle a high volume of jumbo mortgages often advertise rates lower than small lenders. Plus, current bank customers may qualify for a sizable relationship discount based on the other assets they have held by the financial institution.
Finally, mortgage brokers can compare rates from several different lenders. While costs may not be as low as with other options, they're more likely to find you a suitable jumbo refinance loan if you don't meet all of the standard lending guidelines.
Refinancing a Jumbo Loan: What’s Next?
If your jumbo loan balance is below current FHFA loan limits, you may be eligible for a conventional refinance. But even if you need a high-balance loan that exceeds conforming limits, you can still lock in a great rate by shopping around and comparing rates and closing costs from at least three lenders who refinance jumbo loans in your area.
Tim Lucas is the editor and Lead Analyst for MortgageResearch.com. Tim spent 11 years in the mortgage industry and now leverages that real-world knowledge to give consumers reliable, actionable advice. He has been featured in national publications such as Time, U.S. News, MSN, The Mortgage Reports, and more.
