Jump to content

Please consider disabling your adblocker for CreditBoards if you have not already done so.  This site depends on advertising revenue to stay online.


Sign in to follow this  

FHA Refinance - Worth it? honest opinions Needed

Recommended Posts

Hello CV and everyone,  Wanted your brutal opinion because I am in the process of refinancing my FHA loan and just received the loan closing disclosure (CD) today but wanted to know if I'm doing the right thing and/or its worth it or Not.

 

My current FHA loan as follows:

Appraised Property Value $400K

Current Loan interest rate is 3.25% (closed this loan 13 months ago) 

Original Loan Amount $393K
Current Principal Balance $383K (30yrs loan and nearly 29 yrs left).

Loan Maturity date 08/2049 

Current Monthly payment $2400 (Principal $671+ Interest $1,038 + Escrow $690)

 

VS.

 

My FHA refinance loan will be as follows:

Appraised Property Value $400K

New Loan interest rate is 2.75%  

Original Loan Amount $387K
Principal Balance $387K (30yrs loan).

Loan Maturity date 11/2050

New Monthly payment $2391 (Principal + Interest = $1,582 + Escrow $542 + PMI 267)

Cash to close from borrower (me) $2089

 

Thank you all for your feed back.

Share this post


Link to post
Share on other sites

I wouldn't refinance to save $9 bucks. You will eventually get rid of the PMI but there are loan products with conventional loans that don't have PMI. Will you be eligible for a conventional loan within a year or so?

Share this post


Link to post
Share on other sites
3 hours ago, cv91915 said:

How are you not paying PMI now?

There's a PMI I just don't see it. I'm positive there is 

I guess my goal is to significantly save on the interest rate from 3.25% to 2.75% thru the loan term and since i am planning to live in this property for the next 5-10 years.

Share this post


Link to post
Share on other sites
4 hours ago, 8ball said:

I wouldn't refinance to save $9 bucks. You will eventually get rid of the PMI but there are loan products with conventional loans that don't have PMI. Will you be eligible for a conventional loan within a year or so?

You're right and I'm not in it just to save $8.00 monthly but I was thinking if its worth it thru the loan term (30 years) to save on the interest rate from 3.25% to 2.75% thru the loan term especially the closing costs aren't that bad and also since I'm planning to live in this property for the next 5-10 years.

I dont think i would be eligible for a conventional loan in a year or so. Maybe longer but definitely not a year.

Share this post


Link to post
Share on other sites
4 hours ago, cv91915 said:

How are you not paying PMI now?

@cv91915 My October Mortgage statement shows $265 Insurance Premium Disbursement. This is the PMI am I correct? 

Share this post


Link to post
Share on other sites
1 hour ago, Mido said:

There's a PMI I just don't see it. I'm positive there is 

I guess my goal is to significantly save on the interest rate from 3.25% to 2.75% thru the loan term and since i am planning to live in this property for the next 5-10 years.

The numbers you posted make it impossible to compare the two options.

 

Escrow is a red herring, as your insurance and taxes won't vary based on whether you refi or not.

 

Shouldn't your PMI go down with a new loan since your loan balance and LTV are lower now?

 

In order to effectively compare, add up the interest + PMI you'll pay on your current loan over 5 years and over 10 years, then do the same with the new loan terms (lower interest rate and new PMI amount).  

 

I didn't recalculate your payment amounts so I'm relying on your numbers, but your P+I is going down by $127/month (but that includes principal repayment, so you need to isolate the interest portion).

 

 

Edited by cv91915

Share this post


Link to post
Share on other sites

Let me do that .

So just add up the interest + PMI for 5yrs and 10yrs (current loan) and do the same for the new loan. The escrow shouldn't be in calculation. am i correct?

 

Share this post


Link to post
Share on other sites

@cv91915 Am I doing this correctly??

 

Current loan:

Interest 1,040.11+ 265.36 PMI = 1305.47 x 60 = 78,328 (5yrs)

Interest 1,040.11+ 265.36 PMI = 1305.47 x 120 Months = 156,656 (10yrs)

 

New Loan:

P&I  1582.13 + PMI 267.11 = 1849.24 x 60 months = 110,954 (5yrs)

P&I 1582.13 + PMI 267.11 = 1849.24 x 120 months = 221,909 (10yrs)

Share this post


Link to post
Share on other sites
1 hour ago, Mido said:

Let me do that .

So just add up the interest + PMI for 5yrs and 10yrs (current loan) and do the same for the new loan. The escrow shouldn't be in calculation. am i correct?

 

Interest and PMI should be the only variables.  

 

An amortization schedule with cumulative interest makes this a pretty quick exercise.

 

Here's one for Excel:  https://www.vertex42.com/ExcelTemplates/simple-amortization.html 

 

Share this post


Link to post
Share on other sites
1 hour ago, Mido said:

@cv91915 Am I doing this correctly??

 

Current loan:

Interest 1,040.11+ 265.36 PMI = 1305.47 x 60 = 78,328 (5yrs)

Interest 1,040.11+ 265.36 PMI = 1305.47 x 120 Months = 156,656 (10yrs)

 

New Loan:

P&I  1582.13 + PMI 267.11 = 1849.24 x 60 months = 110,954 (5yrs)

P&I 1582.13 + PMI 267.11 = 1849.24 x 120 months = 221,909 (10yrs)

No.  Remove the principal portion of the payments (amortization schedule helps - see previous post).  The interest amount goes down every month.

Share this post


Link to post
Share on other sites
2 hours ago, hegemony said:

what are you trying to accomplish? refis have costs, real and transactional.

Saving interest on the long run. from 3.25% to 2.75%

Share this post


Link to post
Share on other sites
4 hours ago, cv91915 said:

No.  Remove the principal portion of the payments (amortization schedule helps - see previous post).  The interest amount goes down every month.

@cv91915

Did I get that right?

 

Current loan:

Interest 1,040.11+ 265.36 PMI = 1305.47 x 60 = 78,328 (5yrs)

Interest 1,040.11+ 265.36 PMI = 1305.47 x 120 Months = 156,656 (10yrs)

 

New Loan:

Interest 888.13 + PMI 267.11 = 1155.24 x 60 months = 69,314 (5yrs)

Interest 888.13 + PMI 267.11 = 1155.24 x 120 months = 138,629 (10yrs)

 

Saving on interest Current VS New:

$78,328 - $69,314 = $9014 (5 yrs) = $1803/yr saved in interest = $150/mo saved on interest.

$156,656 - $138,629 = $18,027 (10 yrs) = $1803/yr saved in interest = $150/mo saved on interest.

Share this post


Link to post
Share on other sites

you can simply properly accelerate principle to have the same effect and thereby avoid the cost and hassle of the refi, especially since it is only a half a percent difference. To see what I mean, use an amortization calculator and see how simply adding another $200 in principle can greatly shorted the term AND result in less interest. roughly based on your numbers just $200 more properly assigned to principle a month reduces your term by almost 5 years and saves about 36k in interest over the term.

 

if the refi meant you'd get rid of PMI and or shorten the term then perhaps the .5% reduction makes sense.

 

don't let a mortgage broker talk you into generating business...

Edited by hegemony

Share this post


Link to post
Share on other sites
you can simply properly accelerate principle to have the same effect and thereby avoid the cost and hassle of the refi, especially since it is only a half a percent difference. To see what I mean, use an amortization calculator and see how simply adding another $200 in principle can greatly shorted the term AND result in less interest. roughly based on your numbers just $200 more properly assigned to principle a month reduces your term by almost 5 years and saves about 36k in interest over the term.
 
if the refi meant you'd get rid of PMI and or shorten the term then perhaps the .5% reduction makes sense.
 
don't let a mortgage broker talk you into generating business...
Thx hegemony. At some point I felt like doing it so I don't look bad in front of the loan officer but honestly who cares? Your approach makes sense to me.
They are adding $4000 extra on the loan from $383K to $387K and another 15 months to the loan maturity date from 8/2049 to 11/2050 and also those closing costs of $2000+ all for $8 less a month and only 0.5% less and on top still keeping the PMI. I'm now convinced that this is refinance isn't the greatest option at the moment.

Sent from my SM-G892U using Tapatalk

Share this post


Link to post
Share on other sites
2 hours ago, Mido said:

Thx hegemony. At some point I felt like doing it so I don't look bad in front of the loan officer but honestly who cares? Your approach makes sense to me.
They are adding $4000 extra on the loan from $383K to $387K and another 15 months to the loan maturity date from 8/2049 to 11/2050 and also those closing costs of $2000+ all for $8 less a month and only 0.5% less and on top still keeping the PMI. I'm now convinced that this is refinance isn't the greatest option at the moment.

Sent from my SM-G892U using Tapatalk
 

well since you said reducing interest over the term is your goal this is a way to do it without paying for refi. It also offers some flexibility as you can increase the extra principle as you get raises, bonuses, win the megabuckets, etc.

 

of course... you could do both.

Edited by hegemony

Share this post


Link to post
Share on other sites

That Excel template link isn't the one I intended to post.  

 

Try this one and just add up the interest over 60 vs. 120 months.

 

https://www.vertex42.com/Calculators/home-mortgage-calculator.html  

 

Over 5 years:

 

383,000 balance for 60 months at 3.25% = 59,055 in interest (current run rate)

383,000 balance for 60 months at 2.75% = 49,753 in interest (if refinanced)

 

Total interest savings = (59,055 - 49,753) = $9,302

 

Over 10 years:

 

383,000 balance for 120 months at 3.25% = 118,895 in interest (current run rate)

383,000 balance for 120 months at 2.75% =  93,020 in interest (if refinanced)

 

Total interest savings = (118,895 - 93,020) = $25,875

 

The PMI difference is nominal, but easy to calculate, and don't forget to subtract out the transactional costs of the refi to see your actual savings, but with either the 5- or the 10-year ownership window, you'll easily come out ahead.

 

Double check all of my quick calculations and conclusions on your own to make sure I didn't make any mistakes.

 

 

Edited by cv91915

Share this post


Link to post
Share on other sites

Join the conversation

You can post now and register later. If you have an account, sign in now to post with your account.
Note: Your post will require moderator approval before it will be visible.

Guest
Reply to this topic...

×   Pasted as rich text.   Paste as plain text instead

  Only 75 emoji are allowed.

×   Your link has been automatically embedded.   Display as a link instead

×   Your previous content has been restored.   Clear editor

×   You cannot paste images directly. Upload or insert images from URL.

Sign in to follow this  

  • Similar Content

    • By UpInSmoke
      Does anyone have any idea if I can expect for my mortgage scores to drop after refinancing?
       
      Here's my situation:
      I signed the loan docs for my refinance just this week. It's supposed to fund on Monday, September 28th. On Tuesday, September 22nd, I put an offer on an investment property that was accepted the following day (Wednesday, September 23rd).  I received a soft pull pre-approval, however I'm waiting until my refinance funds before doing a complete hard pull application, because I don't want any problems with refinance. Should I be concerned that my score is going to drop when my old mortgage is paid off and before my new mortgage is reported? Right now, my middle score is 747 and I don't want to scores to drop before I get pre-approved for my investment property purchase. Should I hurry and apply as soon as I know the loan is funded, so I don't take the risk of my score dropping because of the payoff of the old mortgage? Any of you mortgage gurus have any knowledge, insight or experience with this situation?
       
      Thank you in advance!
    • By clarrkkent
      I started the refinance process a LOOOOONG 64 days ago. I signed documents on Wednesday this week and haven't heard a peep about closing other than a request for employment verification this afternoon. Turns out my rate lock expires today and it appears the loan hasn't closed. The lender offers complimentary rate locks and has been extending it each time the deadline is met. I didn't receive any such documentation today and, of course, I can't reach anyone on the loan team since it's after hours. 
       
      Wondering if I'm screwed. And by screwed I mean the rate I selected is now $2500 more expensive for closing costs (swinging from partial credit to now paying points). 
    • By frenchy69
      Hi
      I would like to refinance my current house,I purchased my house back in 2017, for 300k
       
      I did  80 and 20 to avoid a PMI,
       
      My 1st mortgage was 4% and 2nd (  20 % )was 6,5% .
       
      I could refinance for 15 yrs @ 2.75 % rate, or 3.375% for 20yrs.
       
      Which is the best route ? I know 15Yrs will save  me tones of interest.
       
      The difference in a payment is about $269  more .
       
      Should I go with a 20yrs and pay $200 more toward my principal ? or pay $269 go with 15 Yrs.
       
      My goal is to own my house in 10 yrs ,pay extra  toward my principals .
       
      Also the closing cost in 15Yrs is only $500 the 20 yrs is $1500 .
       
      Are these fees negotiable ?
       
      Any  suggestions  ?
       
       
    • By SMViera
      New account...old user. Hopefully I can get some good advice from the experts here. I am hoping to refinance my mortgage and have some questions about how to proceed.
       
      Info:
       
      Salary: 78K/year..solid employment in the medical field. Same employer for the past 8 years
      Scores at the moment: Mid score is 690, clean report with no negatives on any. My scores have dropped due to high utilization of CC
      DTI: high (75%)
       
      I built and closed on my house in Nov 2018. 
      Owe: $295,000
      Value: $400,000 (give or take a few thousand) I put 20% down to avoid PMI
      Current interest rate 5.25% 😕
       
      By the end of this month, I will have paid off 32K in CC debt. I will have an additional 20K left on my reports but on cards with high CL's so my utilization will be low on the ones that are left. 
       
      Other monthly obligations:
      Car #1 $657/month
      Car #2 #330/month
      CC's: $400/month (remaining 20K that is left over..this is an estimation but should be pretty close)
       
      So here is what I am hoping will happen (keep in mind...could be very different from reality as I really don't have a lot of knowledge about this) That's why I am here.
       
      I am hoping to wait until June to start the refinance process once all the cards that I am paying down have a chance to update to zero balances. What are the chance my scores would boost up to the 740+ mark (wishful thinking??) I want to pull out some of the equity to pay the remainder of the CC's, would this be an option or advisable? I assume that if pulling money out leaves less than 20% equity in the house then I would have to start paying PMI...is that correct? 
       
      Am I taking a risk waiting until June? Although to be honest I doubt I will be approved which my current DTI. 
      What are the chances of me getting approved at all?
      Is there anything else I should be considering?
       
      I will say that I am working two jobs at the moment which is how I am paying down my cc debt. Its only a six week contract but pretty lucrative. Will that income factor in to my DTI? 
       
      Thank you,
      -S
       
       
       
       
       
       
       
       
       
       
    • By FunnyDonut
      Short Answer: It saves you a lot of money
      According to a recent research from Freddie Mac, the average borrower could save $1,500 just by getting one extra rate quote when applying for their mortgage. With five quotes, they could save $3,000 or more.
       

       
      Wow, so I should really do it. But how exactly should I do mortgage shopping?
       
      Preparation: Estimate your mortgage rate
      There is an old Chinese saying from The Art of War that “If you know your enemies and know yourself, you will not be imperiled in a hundred battles.” That’s exactly why this step matters. Having a rough idea of what interest rate you can expect is crucial for you to play well in this game.

       
      There are many factors that determined your interest rates including base rate (update daily), loan amount, location, LTV (loan to value ratio), credit score, house type (single family vs condo) etc.
       
      So to help yourself estimate, you can talk to your friends who have done mortgage recently and ask about their rates and how they get them. There are also some anonymous mortgage reporting site (such as rate.exposed) to get more data point. Keep in mind the best way to estimate your rates is comparing with people with similar cases.

       
      Now, let’s pick up the phone and start dialing
       
      You can follow the steps here:
      Call 5 lenders, ask them to quote and write the numbers down Find the best quote from the 5 lenders, let’s call it lender A Call the rest 4 lenders again asking them to match (or even beat) the quote from lender A. If you get a quote better than lender A, go back to step 2 and step 3 to call the rest to match Until the number can’t go lower and the rate is within your expectation.
       
       
      Extra Tip 1: Ask for special program
      Different lenders have different promotional program. For example, Wells Fargo has relationship discount where for every $250k asset you move to WF bank account, you get your rate reduced by 0.125%.
      You might just save yourself $10k but just a simple ask
       
      Extra Tip 2: Credit Hard Pull
      Many people are worried about hurting the credit scores by having too many lenders hard pull your credits. In fact, if you do them within a short period of time, multiple credit inquiries will combine to count as only one.
      Also, if you know your credit score in advance, you can simply just ask them not to pull and tell the lender the number. That should be more than enough for lenders to come up with a quote for you.
       
      Extra Tip 3: Pay attention to fees
      Some lenders do the trick to lower your interest by increasing some less obvious fees including closing costs, points, etc. So whenever you get a mortgage quote, always look at the full picture before making any decision.



  • Member Statistics

    • Total Members
      179,621
    • Most Online
      2,046

    Newest Member
    Climaxxll
    Joined

About Us

Since 2003, creditboards.com has helped thousands of people repair their credit, force abusive collection agents to follow the law, ensure proper reporting by credit reporting agencies, and provided financial education to help avoid the pitfalls that can lead to negative tradelines.
×
×
  • Create New...

Important Information

Guidelines