What Is Jumbo Adjustable Rate Mortgage Loan?
What is a Jumbo ARM Loan?
An ARM jumbo loan is an adjustable rate mortgage that exceeds the Fannie Mae and Freddie Mac loan-servicing limits. This amount, for most American counties, is $453,100. For more expensive areas, that limit can go as high as $679,650. Right now, ARM jumbo loans are becoming incredibly popular -- with statistics suggesting that around 75% of ARMs currently issued are actually for jumbo loans. Of that 75%, 47% of those home loans are for more than $1 million.
Is it a good idea for me to get an ARM jumbo loan?
That depends. Most people looking to get an ARM jumbo loan want to get a really nice house, but they don’t want to deal with a high mortgage payment right now. Otherwise, they’d probably get a more traditional 30-year fixed rate mortgage.
To determine if an ARM jumbo loan is right for you, it’s smart to take a look at why you are trying to avoid that higher mortgage payment. If it’s because you can’t afford it at the moment, will you be able to pay up when the fixed interest rate period of the mortgage ends and prices likely increase?
In the end, if you’re considering an ARM jumbo loan, make sure you can afford the payments if and when the rates do go up.Since you’ll be dealing with an even higher payment than someone with a conventional mortgage, you’ll want to make sure you have the income (and the savings) to handle large fluctuations in your mortgage payment.
Can I refinance a fixed-rate loan into a jumbo ARM?
Yes. In some situations, people dealing with a high interest rate fixed jumbo loan want to take a step to reduce their monthly mortgage payments, and a jumbo ARM can help them do this. But, refinancing into a jumbo ARM has risks, so it’s usually best for those who are planning to sell their home in a few years (before the fixed-rate period ends), or those who are confident their income will increase significantly in the next few years.
Can I refinance an ARM jumbo loan into a fixed-rate loan?
Yes. Just like other ARM loans, many homebuyers like to refinance into a safer, fixed-rate loan during the fixed-rate period of their ARM -- before they have to worry about increasing interest rates. If this sounds like you, keep in mind that there’s no guarantee you’ll be able to refinance. If you’re serious about refinancing your ARM jumbo loan, you should have good credit, a decent amount of savings, and make sure that you’re current on all your mortgage payments.
Fortunately, most jumbo ARM borrowers currently have great credit -- which is pretty much a must if you’re considering getting a ARM jumbo loan. Otherwise, you could get stuck in a situation that’s particularly hard to get out of.
Does it pay to shop around for a Jumbo ARM?
It really does. Unlike conventional ARMs or fixed-rate mortgages, jumbo ARMs are more of a niche market -- and that means that interest rates can fluctuate a lot between lender to lender. So, the more you shop around, the better rate you might be able to get.