Refinancing your mortgage this year might be a good move if you have a jumbo mortgage: a home loan over $417,000. Rates on jumbo mortgages are higher than rates on smaller loans. The average rate for a 30-year jumbo is now 7.55 percent while smaller loans charge around 6 percent.
Jumbos have higher rates because they’re not guaranteed by federally-sponsored enterprises such as Fannie Mae and Freddie Mac. Without those guarantees, investors who buy mortgages want higher yields. Therefore, loan rates to borrowers are higher than rates on mortgages that can get those guarantees.
A new federal law may bring down jumbo loan rates. In expensive housing markets, Fannie Mae and Freddie Mac will be able to purchase and guarantee larger home loans. Loans as large as $729,750 will be eligible for federal backing.
The new limits are expected to last through the end of 2008. Homeowners who have jumbo loans might be able to refinance them as conforming loans, later this year, and save substantial amounts.
