How Does a Jumbo Mortgage Refinance Work?

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A jumbo mortgage refinance is similar to refinancing a conventional home loan, though it comes with stricter eligibility requirements. A jumbo home loan is a mortgage that exceeds Freddie Mac and Fannie Mae's conforming loan limit of $766,550, or up to $1.1 million in some high-cost areas. With a jumbo mortgage, a small interest decrease can lead to significant long-term savings. But it’s also important to consider the downsides to refinancing a jumbo mortgage. Find all the details you need for a jumbo mortgage refinance below. 

What is a Jumbo Mortgage Refinance?

A jumbo refinance loan is similar to a standard mortgage refinance but for jumbo loans that exceed Freddie Mac and Fannie Mae's conforming loan limit. According to real estate lawyer William London, that limit for most locations in 2024 was $766,550.

“It allows homeowners to replace an existing jumbo loan with a new one, usually to secure better terms or access equity,” London says. 

To refinance a jumbo mortgage, you'll usually need a loan-to-value ratio of around 80%, a minimum 700 credit score and a well-documented income history.

Pros

• Access equity: If you need money for other projects, a jumbo mortgage refinance can give you access to needed cash. 
• Improved interest rates: Refinancing may lead to better interest rates and short- and long-term savings by lowering your mortgage payments.
• Financial liquidity: Refinancing is a good solution if you need to liquefy some of your asset value to improve cash flow. 
• Shorten or lengthen term: You can adjust your loan term when you refinance. You could save on interest by shortening the loan term or reduce monthly payments by lengthening the mortgage term. 

Cons

• Longer processing time: Jumbo mortgage underwriting is manually processed, so closing can take longer. 
• Stricter requirements: You'll need to meet lender requirements, which are typically more stringent than requirements for conventional mortgages. 

How Does a Jumbo Mortgage Refinance Work

Here’s a step-by-step process on how you can refinance a jumbo mortgage. 

Check Your Eligibility

Lenders will examine your credit score, debt-to-income ratio, payment history, home equity and employment history. Here's what you'll need to have prepared:

• Credit score: Your credit score demonstrates financial responsibility and the likelihood that you'll repay the loan on time. Lenders look for a 700-plus credit score for jumbo mortgages, but the higher your credit score, the better the possibility is for lower mortgage interest rates.
• Debt-to-income (DTI) ratio: The DTI ratio is your monthly gross income compared to total monthly debt payments. Lenders usually look for a DTI of 40% or less.
• Cash reserves: This assures lenders that you can make monthly payments even in the case of financial hardship. You'll usually need to provide proof of cash savings through bank statements.
• Stable employment: Especially for a jumbo mortgage, you'll need to demonstrate stable employment with stable or increasing income. 

Get Prequalified 

For prequalification, lenders will check the documentation above and issue a prequalification letter. You can apply for multiple prequalifications within 45 days and it will count as a single credit check on your credit history. Then, you can compare lender offers. 

Apply for the Loan

Applying for the loan will require additional information, including a government-issued ID, proof of employment, income, savings and other assets, plus any additional lender requirements. Usually, you'll need to provide:

• Most recent pay stub or other proof of income
• Two years of annual tax returns, including W-2 forms
• Past 60 days of bank statements
• Profit/loss and balance sheet if you're self-employed 
• Documentation of other income, such as commissions and bonuses

Complete Underwriting

Underwriting is the verification process lenders go through. This can include an assessment and inspection of the property as well as verification of the documentation and information you provide. 

RELATED: Best Jumbo Loans in Texas

Review and Close on the New Jumbo Loan

Once underwriting is complete, you'll receive final refinance loan approval and can close on the new jumbo loan.

The Bottom Line

• Refinancing a jumbo mortgage is similar to refinancing a conventional home loan, though there may be stricter eligibility requirements 
• The loan limit to qualify for a jumbo mortgage refinance is $766,550
• You’ll need a minimum credit score of 700

Why You Should Trust Us

Benzinga has offered investment and mortgage advice to more than one million people. Our experts include financial professionals and homeowners, such as Anthony O’Reilly, the writer of this piece. Anthony is a former journalist who’s won awards for his New York City economy coverage. He’s navigated tricky real estate markets in New York, Northern Virginia and North Carolina.

For this story, we worked with William London, a founding partner at Kimura London & White LLP. London specializes in real estate, trusts & estates law, family law and mediation services. 

Frequently Asked Questions 

Sources

• William London, founding partner at Kimura London & White LLP