Despite lower jumbo rates, refi may be unwise

Future-Proof: Navigate Threats, Seize Opportunities at ICNY 2018 | Jan 22-26 at the Marriott Marquis, Times Square, New York

Borrowers assumed when the conforming loan limit increased from $417,000 to $729,750 in high-priced areas like New York City, Los Angeles and the San Francisco Bay Area that lower rates on jumbo financing would follow. Unfortunately, the conforming jumbos (also called jumbo lights) were initially priced considerably higher than the conventional conforming loans. For example, on May 2, 2008, a $417,000 conforming loan was available with a 5.38 percent interest rate and one point. Points is the term lenders use for the loan origination fee. One point is equal to 1 percent of the loan amount. At the same time, a jumbo light was priced around 6.25 percent and one point. Mortgages are offered with or without points. The mortgage interest rate will be about one quarter percent lower if borrowers pay one point than it would be if they paid no points. On May 8, pricing on the jumbo light conforming mortgages was brought in line with the conventional conforming loans. This is g...