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Old 04-28-2015, 08:50 AM
 
356 posts, read 666,210 times
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I did a streamline refinance in Oct 2012 and currently have an FHA loan at 3.875. I pay $69 a month for PMI.

I have more than 20% equity in the home. At today's rates, is it worth it to refinance into a conventional to knock out the PMI?

Thanks!
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Old 04-29-2015, 11:26 AM
 
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Depends on how long you are planning to stay in the home. Your interest rate should stay roughly the same, so really the only difference is the MI. Take your closing costs and divide them by the $69 you are paying per month in MI. This will give you the number of months it will take to break even on the refi...

e.g. Closing cost are $5000 / $69 = 72 months. So it would take you 6 years to recoup the cost of the refi and start to get ahead.
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Old 04-29-2015, 11:52 AM
 
Location: New York
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More than 20% equity, three years into current loan, looking at a conventional loan?
  • FYI - FHA loans = MI / Conventional loans = PMI.
  • It is advantageous for both you and your lender to do another (streamline) refinance. Knowing that lenders collect with each payment more interest (less principle) the first few years of a mortgage. For you eliminating closing costs and getting rid of the mortgage insurance.
  • I like the 3.875 interest rate you currently have. Another point is FHA loans now have lifetime mortgage insurance, you went into the FHA loan prior to last year. After 5 years (you = 2+ years) the MI can drop off when you have greater than 78% LTV, and 12 months of on-time payments.
  • One month before the fifth anniversary contact your lender to initiate the removal of the MI. They do not give out refunds on past MI payments!!! More than likely will have to pay for an appraisal.


.

Last edited by Modification Specialist; 04-29-2015 at 12:20 PM..
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Old 04-29-2015, 11:57 AM
 
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^^ This

But also your break even time should be before the PMI could be taken out according to the FHA rules (5 years?).
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Old 04-30-2015, 07:12 AM
 
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Thanks for the replies.

Would it be worth it to refinance to a 15 yr conventional with an interest rate of 3.125? Or is it advised to have the interest rate a full point lower when refinancing?
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Old 04-30-2015, 07:23 AM
 
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Also....is it the same savings to pay an extra payment a year compared to signing up for the biweekly deductions?
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Old 04-30-2015, 10:45 AM
 
Location: New York
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Quote:
Originally Posted by ilikepizza View Post
Thanks for the replies.

Would it be worth it to refinance to a 15 yr conventional with an interest rate of 3.125? Or is it advised to have the interest rate a full point lower when refinancing?
Quote:
Originally Posted by ilikepizza View Post
Also....is it the same savings to pay an extra payment a year compared to signing up for the biweekly deductions?
What is your loan amount?
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Old 05-01-2015, 06:18 AM
 
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Loan amount is $150,000
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Old 05-01-2015, 07:04 AM
 
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Quote:
Originally Posted by ilikepizza View Post
Thanks for the replies.

Would it be worth it to refinance to a 15 yr conventional with an interest rate of 3.125? Or is it advised to have the interest rate a full point lower when refinancing?
What would the closing costs be? Any points? Prepayment penalties?

What would your DTI be?
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Old 05-01-2015, 08:35 AM
 
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closing cost close to $4K.
No points, No prepayment penalties.

DTI 5% not including current mortgage

DTI 17% with current mortgage included

Last edited by ilikepizza; 05-01-2015 at 08:58 AM..
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