Jumbo refi question

[boiler717]

Right now we owe $600k on our house. Current value of our home is around $900-$925 (conservative estimate). Would a cash out refi allow us to apply the $52k-ish to drop our loan down to $548k so it would no longer be a jumbo loan? Or does it not work like that?
We plan to do a Reno with a HELOC in 2ish years and it would be much easier if we weren’t in a jumbo loan.

[juliej]

Taking cash out makes your mortgage go up, not down.

[savan]

Nov 16, 2021 11:15:11 GMT -5 juliej said:

Taking cash out makes your mortgage go up, not down.

This.  If you refi and take out $52k, your new mortgage becomes $600k + $52k = $652k.   You could then in theory apply that $52k to the mortgage but that would just get you back down to $600k and you are out all the refi fees.   You would be better off using that $52k toward the Reno.

[dutchgirl678]

I got a phone call from a friend who helped us refi a few years ago and he said they raised the limit for a non-jumbo loan to $625k. So you may not have to get a jumbo loan if you refi. When we refi'd he split ours into a main and a HELOC to avoid the jumbo loan, but we are not planning to use the HELOC money. I really don't like it as it is a variable rate loan and the first ten years you pay only interest on it.

[boiler717]

Nov 16, 2021 11:15:11 GMT -5 juliej said:

Taking cash out makes your mortgage go up, not down.

Yes! But wondering if there’s some way to use equity to pay down the principal.

[boiler717]

Nov 16, 2021 11:36:23 GMT -5 dutchgirl678 said:

I got a phone call from a friend who helped us refi a few years ago and he said they raised the limit for a non-jumbo loan to $625k. So you may not have to get a jumbo loan if you refi. When we refi'd he split ours into a main and a HELOC to avoid the jumbo loan, but we are not planning to use the HELOC money. I really don't like it as it is a variable rate loan and the first ten years you pay only interest on it.

Oh nice that it is increasing! So maybe in 2022 it will work.

[k3am]

Jumbo loan may be higher than $625k depending on your area. In CA, I think the qualifier is somewhere in the $800k range to be considered a jumbo. (ETA: correction, google tells me that it's limited to certain parts of CA - www.fhfa.gov/DataTools/Tools/Pages/Conforming-Loan-Limits-Map.aspx)

There is literally no way that a refinance without bringing additional funds to the table reduces your principal balance.