I am posting as a guest because I am going to use real numbers and don't feel comfortable posting under my regular screen name. DH and I have been desperately looking for a way to refinance our mortgages for the last 18 months. Our current loans are 80/20 loans taken out in June 2006 and the interest rates are killing us (this decision was pre-MM). The 80 loan is a 30 year conventional at 6.625% and the 20 loan is a 25 year conventional second interest only at 7.875%, we pay more than just the interest payment on the second. Currently we owe approximately what our house is worth based on similar house listings (better than being underwater I suppose).
The only option we have found to date is an option to refi the first only with an MHA loan. What we have been presented are these estimates: A 30 year - 4.5% interest or a 20 year - 4.25% interest. Both reflect interest rates with no points and a portion of closing costs being paid by the lender. The MHA loan does not require an appraisal. Closing cost total - approx $2433 rolled into loan. We will skip a payment and could take that money and apply it towards the principal of the new loan. If we did that we would be within 1500 of what we owe now.
On the 30 year payment would decrease by $244.00 per month, if this savings was applied towards the principal for 5 months we would be back to our current principal. Payment on the 20 year would be $87.00 lower than current payment. With this option we are shortening our term and also building equity faster. If this savings was applied towards the principal for it would take a little over year to recover the cost.
Currently we hope to only stay in this house a max of 2-3 more years. Are there other options I don't know about? Which would you do given the time frame? Should we shop around for lenders? This quote was from a BOA lender.