Quote:
Originally Posted by greenthinker
I started to refinance my house. Mortgage company offered two options:
1. 4.625% no mortgage insurance
2. 4.25% with monthly mortgage insurance $163.37.
The loan amount can go 95% of current appraisal value.
Which option should I take? Your expert's advice is highly appreciated!
Nate
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I guess, to me, it would depending on a few things.
- How much are you going to borrow?
- How long do you plan on owning the house?
- When does the PMI expire?
Let's assume $300,000 appraised value and a loan of $285,000, 30 years of ownership, and PMI expires at 80% LTV.
$285,000 @ 4.250 Payment = $1402.03
$285,000 @ 4.625 Payment = $1465.30
That's a savings of $63.27 @4.25 but you must add $163.37 PMI which comes up to a negative savings of $100.10 BUT assuming your PMI will drop off at 80 LTV you will make <> 95 PMI payments @ 163.37 * 95 = $15,520.15
The interest savings goes as follows (OVER 30 YEARS):
$285,000 @ 4.250 Interest = $219,729.92
$285,000 @ 6.625 Interest = $242,506.20
Which is a savings of $22,776.28 @ 4.25 which would give you a overall savings of $7256.13 including the extra paid to PMI.
Again, since you did not give any extra information, this has alot of assumptions.
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