Best financial decision in this scenario? (Elk Grove, Folsom: 2015, rent, insurance)

[ecsdude]

Hi,

Based on the below details, could someone tell me if it'd be worth refinancing after 5 years already, even if I am not sure how long I intend to stay? Or would I be better off selling now while the selling is good and pocket the money?

I live in Elk Grove and commute to Folsom daily for work. The area is convenient, house is cozy (no unused space) and the neighborhood has been decent with no really bad crime I've personally experienced aside from a string of breaking into mailboxes. The area is super convenient and central to everything. Things could always degrade, and long-term considerations is one reason I'm considering moving elsewhere, perhaps Folsom, since there'd be benefits to living closer to work, and even if I decide to change companies, living in Folsom still seems like a brighter long-term proposition than Elk Grove, but then again Elk Grove may maintain it's quality of life and relative safety rather than degrade.. I'm mostly just guessing.. But the price of homes is considerably higher in Folsom and I doubt I'll see a big boost in equity like I enjoy now from my house in Elk Grove.

Details:

• Loan Type: 30yr fixed (FHA)
• Purchase price: $173k
• Current value: $235-$250K
• Original Loan: $169K
• Remaining Loan: $154K
• Rate: 4.875%
• PMI: $71.xx
• Remaining time on loan: 25 yrs (this July 1, 2015 will be 5 years)
• Current Interest Rate: 4.0% (maybe 3.85 or 3.9 if timing's right)
• Monthly payment: $1216.xx (P&I ~$897.xx, tax escrow ~$166.xx, PMI ~$71.xx, Insurance $68.xx - I don't have the exact numbers handy but this is ballpark)
• Closing costs + appraisal: ~$2600 (rough estimate) (may be able to roll into new loan)
• Don't really know if I will want to live there for another 10 years or even 3 years but like the idea of cutting my monthly payment of $1216.xx (see above) down to roughly $1020 or so.
• Still have student loans ($250) and a car payment ($330) that will impact the amount of loan I can qualify for, thus narrowing my home buying choices in Folsom.
• Have flirted with the idea of renting it out at some point. Could probably rent out for $1300-1350/mo. That would bring in a net income of over $300/mo if I refinance. But the house is 25 yrs old and due for water heater, AC, air duct replacements at some point, so not sure if being a landlord of the property would be more headache than it's worth.
• Have also flirted with just selling it while I have $81-96K of equity (which may net me $55K-$70K after closing costs and any anticipated repair concessions needed) and buying a nicer place in a nicer area closer to work, since that's a considerable amount of tax free money, and just 2 years ago or less when things were depressed, I was like $30k upside down on it, and I don't know where the market will go if I sell later.

What would you guys do?

Thanks in advance.

[NinaN]

Have you spoken to a mortgage broker yet? The best way to get your answer is to have them do an estimate for you to refi into a conventional loan without PMI since you have the 20% equity. And while they are at it, you can ask how much you would qualify for if you sold and had $XX as a down payment on another house.

If your credit score is very high, you can now do conventional loans with lower down payment that avoid mortgage insurance. But your score has to be high to get rate low enough to offset the lower FHA loans.

The market is strong right now, but anything extra you get for selling...you will use up when buying something more expensive. Make sure you understand home prices in Folsom before buying.

And have you looked at the Anatolia area? Gets you much closer to Folsom with nicer houses at lower prices. You do have to check Mello Roos though because they all have them there. But some also have solar which can offset that cost.

[ecsdude]

Originally Posted by NinaN

Have you spoken to a mortgage broker yet? The best way to get your answer is to have them do an estimate for you to refi into a conventional loan without PMI since you have the 20% equity. And while they are at it, you can ask how much you would qualify for if you sold and had $XX as a down payment on another house.

If your credit score is very high, you can now do conventional loans with lower down payment that avoid mortgage insurance. But your score has to be high to get rate low enough to offset the lower FHA loans.

The market is strong right now, but anything extra you get for selling...you will use up when buying something more expensive. Make sure you understand home prices in Folsom before buying.

And have you looked at the Anatolia area? Gets you much closer to Folsom with nicer houses at lower prices. You do have to check Mello Roos though because they all have them there. But some also have solar which can offset that cost.

I haven't yet talked to a broker.

Do you happen to know if the rule to remove PMI requires satisfying both of these two conditions?: (1) 5 years of payments, (2) 80% loan-to-value ? Or is it either/or? I know they use last appraised price (my purchase price) to calculate LTV, so I would need a re-appraisal to remove the PMI.

Anatolia looked like it had some nice houses from what little I saw of it (so don't know about better than Folsom houses), but I wasn't too sure about the crime situation there, and I think that's like in the Rancho Area and generally was concerned about how good that area is/will be and the lack of grocery shopping among other things. But it is closer to work for sure.

[Mr. Ozo]

I'm a fan of the 15 year mortgage myself. I refinanced to a 15 year a few years ago and my rate is 2.875. You can get off FHA now if you have more than 20% equity which it sounds like you do.

I'm also fan of living closer to work, but your happy and you won't find anything in your current price range in Folsom. We can't tell you what to do in that regard.

[NinaN]

PMI rules have changed so it depends on the date of your mortgage. It's aometimws easier to refi than get PMI removed.