Define Jumbo Mortgage Rates
Jumbo mortgages are typically more expensive than conventional mortgage loans. If you are considering purchasing or refinancing a house that would require a jumbo loan, it is important to understand jumbo mortgage rates and what they mean for your finances.
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What is a Jumbo Mortgage?
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Jumbo mortgages have a balance larger than a traditional loan. The point at which a conventional loan becomes a jumbo loan is defined yearly by government-affiliated mortgage agencies. As of 2010, a mortgage larger than $417,000 was considered jumbo.
Jumbo Mortgage Rates
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Interest rates are higher when a mortgage crosses the jumbo threshold because larger-balance loans contain more risk for the bank. Additionally, MortgageLoan.com notes that this type of loan is more difficult to sell to investors than traditional smaller mortgages, causing banks to boost their profitability with higher rates.
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Solution
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To avoid paying higher rates for mortgages over $417,000, it is possible to obtain a traditional mortgage just under the limit and a second mortgage for the remaining balance. Ric Edelman of CNBC also recommends investigating adjustable rate mortgage options (ARMs), as these may be obtained for amounts up to $2 million at rates lower than jumbo mortgages.
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