The Mortgage Professor’s column on Monday gave a very interesting list of mortgage interest rate premiums.
Mortgage interest rate premium is the increased interest rate a borrower will obtain on a loan by deviating from the “ideal” borrower.
Borrowers in the best position to refinance profitably have loan balances of $417,000 or less secured by a single-family house in which they reside. They will also have a credit score of 800 or more, and have equity in their property of 20 percent or more.
Guttentag observes:
The interest rate premiums associated with deviations from this standard are larger today than I have ever seen them.
He breaks out the increased interest rate for loan amount, type of property, loan purpose (investment property, cash-out, etc.), credit score, and equity in the property.
You can click the link above to see the numbers. Here is a quick summary:
A conforming jumbo loan, which means a loan balance between $417,000 and $625,500 in a high cost area like mine, has a premium of 1%.
Non-conforming jumbo loan (balance greater than $417,000 in a non-high cost area): 2%
Condominiums: 0.75%
Investment Property: 1.375%
Cash-out refinance: 0.25%
Credit score 780 (instead of 800 or higher): 0.125%
Credit score 700: 1.125%
All this data is very interesting if you are considering a refinance.
If you are considering a refinance or acquisition mortgage and you want to be a fully educated loan shopper, read everything on Guttentag’s website. You will be much better for it.