Jun
25
Should I refinance? FHA Streamline from 6% to 5%?
By
I bought a house about 7 months ago.
I paid down 3% on an FHA loan at 6% for about $184K
Now the same mortgage broker is offering me an FHA streamline down to 5%.
He says there are no fees or appraisals, except for the Mortgage insurance fee which is about 2400 (they’re rolling that into the loan) and I make one payment to the title company (about $1370). My mortgage payments will be about $95 lower. Seems pretty good to me, I just hate to change banks because I really liked the bank I was with so far (I suppose my loan could get sold anyway). The new loan would be somewhere around 187K.
Does that mean that the 3% I put down the first time won’t count for anything anymore?
4 Comments
June 27th, 2009 at 5:44 pm
you can but you will be bringing cash to close
June 28th, 2009 at 11:15 pm
Your ORIGINAL 3% down payment REDUCED the ORIGINAL Principal amount so yes, it is in effect GONE and goes not apply to a new loan. Basically you are asking if a reduced monthly payment of $95 a month is worth the cost of refi. IF the costs are ONLY $2400 and $1370 then the total cost of refi is $3770 divided by $95 = 39.6 months or 3.31 years to BREAK EVEN but that is WRONG. The $2400 is so NICELY rollin into your original loan amount so you are not borrowing the amount currently owed on the house but that amount PLUS the 2400 so now you need to add the interest that will be charged for that extra amount over the next 30 years.
if you currently owe $184,600 at 6% int then PI should be $1,107.58. IF you refi at $187,000 with 5% int then PI should be $1004.83 and leave a difference of $102.75 per month and you would need to keep the loan for 13.33 months or 1.11 years to break even. You then need to keep the loan for more time to earn a return on the investment of $1370 you spent to get the refi done.
Bottomline is there ARE going to be more closing costs to do the paperwork AND you are going to need to keep the loan for a longer period of time. And yes, your loan WILL be resold. The banker is trying to INCREASE his income by rewriting your loan which pays HIM commisions. This is a GREAT deal for him and only a marginal idea for you.
July 1st, 2009 at 8:39 pm
Leave it alone. They are rolling the $2400 into the loan so it isn’t free. Besides you are going to find that your home is likely worth less than it was last year and that will be a problem with a refi. Leave is alone unless y ou have an adjustable loan. If it’s fixed wait for it to go lower. It will.
July 5th, 2009 at 1:51 am
Penny wise and pound foolish is what they used to say. All this refinancing to save short term a couple of bucks, but long term deeper in debt is part of what caused this whole housing problem. No one ever thinks long term for what 1% not worth it