Home Buying in 07066>Question Details

rjsplumbing6, Home Owner in Orange, CA

Should I refi my FHA loan?

Asked by rjsplumbing6, Orange, CA Sat Jun 22, 2013

I bought my home in october of 2009. It is an FHA loan with PMI. The current rate is 5.25%. I am thinking about refinancing. My mort rep came back with the numbers at 3.75% and told me I would be saving $131 a month due to the PMI going up. That all the savings I would be saving with the lower rate is going to the doubling of PMI.
My question is, is it worth it to get the lower rate or stay where im at so I dont reset my 5 years all over again? If I do stay with my current rate what do I have to do to get this PMI off?


Help the community by answering this question:


From the perspective of a mortgage banker, it makes zero sense to refi to save $131, lock yourself into permanent mortgage insurance (as Gerald mentioned), pay closing costs, and now probably be at the mid to high 4 % after last week's rate adjustment up (also said by Gerald). Something to keep in mind when refinancing - you need to determine what the goal is. A lot of times, there is an immediate savings, in your case $131. This might be enough for you to refinance, if freeing up that money is a necessity. If you look at it from a longer term view, you should get the total costs, including your escrows, and divide that number by your savings ($131 in this example). This will tell you how many months it will take to recuperate the costs and actually get ahead. If you aren't going to be in the home for greater than that term, then there is no long term benefit. Just because the rate is going down doesn't always mean it is a good idea to refinance. Lastly, mortgage bankers and brokers may tell you that you are getting a month off from payments that help offset costs. Yes, you skip the first month of payment after refinancing, but that simply gets tacked on to the end of the term, it's not a free month and should not be viewed as a way to offset costs.

If you have any other questions, or would like to run your scenario by me, please email or call me.

Ryan McPartland
Mortgage Banker
JPMorgan Chase
1 vote Thank Flag Link Mon Jun 24, 2013
Hi Ryan, same question I asked Paul. Do you do jumbo loans if i'm putting down less 20% and loan is above 417k, no PMI and Lender paid either. What is the current apr on that? 30 yr fixed or an arm perhaps.....
Flag Mon Sep 15, 2014
Why are you set on going the FHA route for your refinance?

Every lender's requirements will vary, however, you can obtain conventional financing with a 620+ credit score and possibly remove monthly PMI payments even if you don't have 20% equity. Not to mention the savings would most definitely increase by avoiding FHA.

While we'd need discuss the specifics of your current mortgage, I'd recommend a conventional 26 year or 27 year fixed-rate, so you wouldn't be adding on any additional years of payments AND just picking up where you left off, not to mention at a lower interest rate. Fact of the matter is your mortgage is an extremely powerful tool and, when structured correctly, can provide some truly amazing benefits.

If you'd like to discuss your scenario in greater depth, I'd welcome the opportunity to weigh out real options that will create both short term and term term benefits. Please contact me at your earliest convenience via phone or email; whichever is easiest for you.

Kindest regards,

Paul F. Marzolla
Sr. Mortgage Consultant
(201) 957-6768
0 votes Thank Flag Link Mon Jun 24, 2013
Paul, do you do Jumbo Loans with no PMI as long as the loan is above 417k. What is the APR on this?
Flag Mon Sep 15, 2014
Thanks alot guys, really helped out in this situation. Appreciate it, now I know who to call when I need something in the future, honest guys

0 votes Thank Flag Link Mon Jun 24, 2013
The guidelines have changed and it does not make sense for you to refinance now. The new rules for Mortgage insurance on FHA loans is it lasts for the FULL term of the loan, NO matter what the LTV(loan to value) is. In simple terms, no matter how much you pay down the balance or the home appreciates in value, the Mortgage Insurance stays until the loan is paid off and closed.
This is in addition to the facts that the available rates just jumped up last week, and the new mortgage insurance is higher than you are already paying(which you already know).
You would qualify in October of 2014 to drop the mortgage insurance, after 60 payments and if the loan balance is 78% of the home value.
0 votes Thank Flag Link Sat Jun 22, 2013
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