A jumbo (or non-conforming) mortgage is a mortgage that is larger than the government-set limit for individual mortgages. For the contiguous U.S., this means anything above $417,000. For Alaska, Hawaii, and U.S. territories, this applies to anything above $625,500. Jumbo mortgage rates are generally higher than traditional mortgages, both because a jumbo loan is viewed as a higher risk and because the government housing agencies, Fannie Mae and Freddie Mac, will not finance a jumbo loan. Jumbo mortgages usually require a high down payment, around 20%, in addition to the higher interest payment. There are also stringent guidelines that banks have for who can qualify for a jumbo mortgage, typically requiring the potential homeowner to have a credit score of 720 or above. Currently, jumbo mortgage rates are approximately 0.4% above conforming mortgage rates, and fluctuate from 0.25% – 0.50% above conforming mortgage rates.

Many people that already have a jumbo mortgage loan wonder if it’s possible to refinance their loan in today’s market. If the mortgage was taken out in the past five years, chances are that a refinancing would not help as current jumbo mortgage rates for refinancing are typically around 7.00%. However, some people that borrowed when their mortgage was considered a jumbo mortgage may be able to refinance as a conforming mortgage. A mortgage over $359,650 was considered non-conforming in 2005. Today, the limit for a non-conforming loan is $57,350 higher, meaning a mortgage classified as “jumbo” in 2005 (or earlier) might be classified as a conforming loan today. What does that mean for the homeowner? Refinancing would be a smart move, with average refinance rates now falling below 5.00%

If the home was not purchased in 2005 or before, or would not be considered conforming by 2011 standards, it may still be worth refinancing. As a rule of thumb, the homeowner should consider whether or not the new interest rate is more than 0.25% below their current interest rate. If the refinancing rate doesn’t save the homeowner at least 0.25% compared to their current interest rate, it’s likely that the cost of refinancing will outweigh the potential benefits.