My wife and I have an opportunity to refi on our house that we've owned for 4 years this April. Our original mortgage is FHA and locked in at 5.85% with APR at 6.0. We have an opportunity to lock in at about 3.85% I know this is a no brainer but I really do need a boost of confidence to do this. My wife and I are both employed however we are caring for a family member who is medical dependent. It's hard sometimes to look at financial advantages when you have to lay out money to do so.
We purchased the house in Apr-08 for $344K. My house is currently underwater by alot. Zillow lists it at $195K but I'm guessing market price is more like $240-250k. Still gulp! Interviewed with a broker last night who thinks we can get down to 3.80% (today it's 3.85). Our current monthly is $2729. $2033 for the mortgage, $566 for the taxes and $130 for PMI.
My wife and I are both employed, make about $140K, we owe $328K left on the mortgage. Our scores range from 692-727. The problem is we've made a bunch of necessary repairs to the house (just spent $5,000 on a new furnace) Our savings is down to $12K. The one good thing is we have very little debt. About $3500 in revolving and one car payment per month at $400. Our Debt to Income with the new mortgage is about 22%.
According to a prelim GFE our closing costs on a Streamline FHA are around $9K. New title is listing at $2000, deposit for escrow $4500, Transfer tax-$2500, PMI upfront $3300, all equal to $9102. The additional catch is that we are locked back into PMI for 5 more years and the rate is higher than when we close. About $277 per month versus $130. My mortgage principle is only reducing from I know I need to think long term but the thought of depleting my account $10K in closing to save maybe $200 per month over the next 5 years is not as terrific as I previously thought.
By all accounts, closing costs ($9100) + additional PMI ($15,326) what am I really saving? How much of the closing costs will come back to me either in previous escrow credit and how much of the closing costs can I deduct from next years taxes.
Old Mortgage Payment
P&I $2066
PMI $135
Taxes $586
Total- $ 2787
In one year Payment will be $ 2652
New Mortgage Payment
P&I- $1559
PMI-$277
Taxes- $586
Total- $2422 for 5 years
Closing costs:
Origination: $725
Mortgage Insurance Premium-$3284
Title Services & Insurance- $715
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Homeowners Ins- 4months-$328
Property Taxes 8 months- $3896
Recording Fees to County $400
Transfer Taxes- $2650
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Total-$9102.72
So if I understand this right, I am spending $25,000 on closing costs and additional PMI (and adding 4 more years of P&I) to save only $15,480 in P&I and extend my mortgage 4 more years.
How does this sound like a good deal?
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