Jumbo Mortgage Discount Points

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Jumbo Mortgage Discount Points, A Thing Again.

Jumbo mortgage discount points are in the news. As a matter of fact, The Wall Street Journal published an article discussing the jumbo mortgage discount points. Wall Street writer Katie McLaughlin interviews Joel Richardson, your local Austin home loan officer, for this article.

Summary of My Jumbo Mortgage Discount Perspective

In the article, I mentioned a recent jumbo to refinance loan experience. Interestingly, this example highlights the current scenario with these types of loans. Jumbo borrowers have paid more in points for the past few months than before the pandemic began. Additionally, we are also seeing a wide variance in jumbo mortgage rates. Not only a wider variance but also where the difference between jumbo loans and conforming loans has narrowed.

In this article, we will net out the benefits of discount points.

What is a jumbo mortgage?

Before discussing jumbo mortgage discount points, you may wonder what is a jumbo mortgage. A jumbo mortgage is a loan designed to finance high-value properties that exceed the maximum conforming loan limit set by the Federal Housing Finance Agency (FHFA).

FHFA annually adjusts these limits, which differ by county annually. The agency considers any mortgage that goes beyond these limits a jumbo mortgage. Because of the higher loan amount and increased risk for lenders, jumbo mortgages often have stricter underwriting requirements, higher interest rates, and larger down payments. Moreover, borrowers who purchase high-value properties will typically have a jumbo mortgage.

Why Discount Points?

Lower interest rate:

One of the primary reasons to pay jumbo mortgage discount points is to obtain a lower interest rate. Discount points are prepaid interest you pay upfront to lower your mortgage rate. By paying these points, you may be able to secure a lower interest rate on your jumbo mortgage, which can result in significant savings over the life of the loan.

Reduced monthly payments:

Another benefit of paying discount points is that they can lower the monthly mortgage* payments. By obtaining a lower interest rate, the interest you pay each month will decrease, which can translate into lower monthly payments.

Long-term savings:

Finally, paying jumbo mortgage discount points could potentially help save money in the long run. While it may require some upfront costs, the savings a homebuyer can achieve from a lower interest rate and reduced monthly payments can add up over time.

Check out the article and contact us today to learn more about jumbo mortgages.

*All loans are subject to final credit approval and accepted property. Conditions and restrictions may apply. Equal housing lender. This in no way is a substitution for consulting with your certified public accountant and/or financial advisor on the best strategy for your financial well-being.

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