MMR: Refinancing our mortgage WWYD

[bowies]

How much longer do you want to stay in the house? Figure out how long it will take to break even between the closing costs and the decreased monthly payment.

[LoveTrains]

Well dropping the PMI is what is bringing you the savings so that is good. General rule of thumb is that a 1% interest rate drop can be beneficial. I would ask for detailed closing costs.

[Deleted]

So you're refinancing and paying less but you don't have to pay closing costs, right? In that case it kinda seems like a no brainier. Is your term extending?

[arch01]

Don't roll the closing costs into the payment. Think about it-do you really want to pay on $3k (or whatever) in closing costs, plus interest, over the next 30 years?

What is your LTV right now? I'm smelling something a little fishy-did you purchase when the PMI was mandatory for the life of the loan? What do your mortgage documents from when you originally purchased say about dropping PMI? Do you have to go on the original appraisal value?

You need to run the numbers-what will it take to get PMI to go away (typically 78% LTV will have it drop automatically) vs. paying closing costs again but dropping the PMI, but adding X number of years to the loan.

How long have you been there?

There's really not enough info posted to make a recommendation-but something is sounding a little off to me unless they're saying that with the new values you'll be at that magic 20% equity, but without you have to go on the original appraisal and it'll be a bit before you hit 78% LTV.

Also-what will you do with that $300 savings? What is the difference between a 30 year rate and a 15 or 20 year (if offered) rate? Do you mind having a mortgage or is it a debt that you want to see disappear ASAP?

[cricketwife]

1. Yes, calculate costs of refinancing and how long it will take to recupe to see if it's worth it for you.
2. If you pay for an appraisal and prove that you have 20%equity int the house (or whatever your terms are), you can eliminate the pmi from your payment and keep your current loan.

[cricketwife]

Jan 14, 2015 20:29:40 GMT -5 TamiTaylor said:

Jan 14, 2015 20:05:23 GMT -5 cricketwife said:

1. Yes, calculate costs of refinancing and how long it will take to recupe to see if it's worth it for you.
2. If you pay for an appraisal and prove that you have 20%equity int the house (or whatever your terms are), you can eliminate the pmi from your payment and keep your current loan.

The closing costs are around 3k. We would recoup in a year. We might be able to dip into savings and pay them up front though.

What do I need to do for going the appraisal but keep the same mortgage route?

First, I'm not sure if you would actually recoup closing costs that quickly if you take the pmi out of the equation --not saying you shouldn't refinance, you just want to understand what the costs are.   

To to answer your question, I would start by contacting the mortgage holder and asking them what their requirements are. They may have paperwork you need to do, you may just need to submit the appraisal. 

[aspentosh]

We will be refinancing from 4% to 3.625%. It's worth it for us. We aren't rolling in closing costs because I don't want to pay interest on it. We'll be able to recoup our closing costs ($3500 or so) in a little over a year.

I say do it because that's a significant savings each month.

[jloww]

I think 4 years ago FHA loans had a 5 year minimum on PMI.  So, you could get an appraisal at the 5 year mark and drop it.  

[LoveTrains]

Jan 14, 2015 19:23:51 GMT -5 TamiTaylor said:

Jan 14, 2015 19:19:45 GMT -5 LoveTrains said:

Well dropping the PMI is what is bringing you the savings so that is good. General rule of thumb is that a 1% interest rate drop can be beneficial. I would ask for detailed closing costs.

What would I need to look at for?

I would want to make sure that some of the fees aren't BS or could be negotiated downwards. There is a cost to the refi - and its the closing costs, even if you are rolling them into the loan. So you would want to make sure you are getting the best value possible.

I would look at the total for closing costs, as others have suggested, and calculate how long it will take you to pay that off with the decreased payment so that you break even.