Refi to rid myself of PMI

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Topic Author
moose83
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Joined: Tue Feb 04, 2014 11:45 am

Refi to rid myself of PMI

Post by moose83 » Mon Mar 09, 2015 9:08 am

Hi All,

Wanted to get some thoughts on possibly doing a refi.

House was appraised at 440 when I got my FHA loan in 2010.
375k left on mort at 4.5%
160 PMI a month

On the current mortgage, I have been doing bi-weekly and 100 dollars extra in principal a month.

Was looking to possibly refi into a 20yr mortgage at 3.625. This would require me to put 25k down to bring my LTV to 80% or 30yr at 3.75.

Do you think it is worth doing either? The PMI just feels like such a waste of money every month.

Long term plans(5yrs or so) I will probably be moving to a larger house(will need the bedrooms). I have about 1500 a month that I am going to start investing in VTSAX. Would it make sense to use that money differently, e.g. towards my current mortgage to get to the right LTV?

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kenyan
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Re: Refi to rid myself of PMI

Post by kenyan » Mon Mar 09, 2015 9:23 am

PMI is indeed a waste of money every month. It's very expensive insurance that you're buying for someone else's benefit.

Assuming that you can get the appraisal and bank to line up properly to get rid of your PMI, it's almost certainly worth it. Back-of-the-envelope, paying that extra 25k will make you 3.625% (mortgage interest) + 7.7% (PMI savings). 11+% guaranteed return sounds pretty good to me, and that doesn't even include your refinancing benefit.
Retirement investing is a marathon.

Topic Author
moose83
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Re: Refi to rid myself of PMI

Post by moose83 » Mon Mar 09, 2015 10:47 am

kenyan wrote:PMI is indeed a waste of money every month. It's very expensive insurance that you're buying for someone else's benefit.

Assuming that you can get the appraisal and bank to line up properly to get rid of your PMI, it's almost certainly worth it. Back-of-the-envelope, paying that extra 25k will make you 3.625% (mortgage interest) + 7.7% (PMI savings). 11+% guaranteed return sounds pretty good to me, and that doesn't even include your refinancing benefit.
Thanks for the response Kenyan.

With my plans to move in 4-5yrs, do you think it makes more sense to jump into a 30yr at 3.75 (still 25k down and 350k mortgage) to have some extra saving/investing money month to month?

slbnoob
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Re: Refi to rid myself of PMI

Post by slbnoob » Mon Mar 09, 2015 10:50 am

I would do it. In fact I refi'd mine last month to get rid of PMI and put up 10k down payment (unexpectedly, since the appraisal came in favorably). Since you're looking to move in 4-5 years, perhaps look at no/low closing costs since that time frame may not be enough to cover closing costs.

delamer
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Re: Refi to rid myself of PMI

Post by delamer » Mon Mar 09, 2015 11:24 am

I would do a bit more checking on the refi rates, if your credit is very good. You might be able to get a rate closer to 3.25% for 30 years.

Try your credit union, if you belong to or can join one.

Twins Fan
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Re: Refi to rid myself of PMI

Post by Twins Fan » Mon Mar 09, 2015 11:43 am

moose83 wrote:
kenyan wrote:PMI is indeed a waste of money every month. It's very expensive insurance that you're buying for someone else's benefit.

Assuming that you can get the appraisal and bank to line up properly to get rid of your PMI, it's almost certainly worth it. Back-of-the-envelope, paying that extra 25k will make you 3.625% (mortgage interest) + 7.7% (PMI savings). 11+% guaranteed return sounds pretty good to me, and that doesn't even include your refinancing benefit.
Thanks for the response Kenyan.

With my plans to move in 4-5yrs, do you think it makes more sense to jump into a 30yr at 3.75 (still 25k down and 350k mortgage) to have some extra saving/investing money month to month?
With plans to move in that time frame, maybe look into one of the ARMs out there. Lower interest rate and lower payment for more saving/investing in that time?

I agree that PMI is a waste of money for you and easy money for them. Doing the refi in this situation sounds like a good deal.

SimonJester
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Re: Refi to rid myself of PMI

Post by SimonJester » Mon Mar 09, 2015 11:55 am

Just make sure you are going with a conventional mortgage on the refinance and not a FHA /FHA Streamline refinance.

The annual MIP schedule for an FHA Streamline Refinance which replaces a loan from on, or after, June 1, 2009 is as follows :

15-year loan terms with loan-to-value over 90% : 0.70 percent annual MIP
15-year loan terms with loan-to-value under 90% : 0.45 percent annual MIP
30-year loan terms with loan-to-value over 95% : 0.85 percent annual MIP
30-year loan terms with loan-to-value under 95% : 0.80 percent annual MIP

For homeowners using the FHA Streamline Refinance to replaces a loan from on, or after, June 1, 2009, the FHA MIP cancelation schedule is as follows :

Loan-to-value of 90% or less at the time of closing : MIP required for 11 years
Loan-to-value greater than 90% at the time of closing : MIP required for life of loan
"They who can give up essential liberty to obtain a little temporary safety, deserve neither liberty nor safety." - Benjamin Franklin

Topic Author
moose83
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Re: Refi to rid myself of PMI

Post by moose83 » Wed Aug 19, 2015 4:54 pm

Took me a bit to finally get this moving but here is where I am.

Just not sure what is the best option. Either one I have to fork over 18k to rid myself of the PMI. I'm ahead on my first loan by few years and on interest of course, should I just keep that guy and continue to prepay what I save(157 from PMI)? or refi and do the same but be on lower interest rate?

Thanks in advance.

Current Loan:

Original Principle: 420k
Current Balance: 370k
Rate: 4.25(had that wrong in first post)
First payment was made on 10/01/10
PMI is 157 a month.
Payment: 2,064 a month
I have been doing bi weekly w/ an additional 108 a month

I can remove PMI on my current mortgage by making a payment of 18k.

Or do a Refi

Appraisal came in at 440k
Rate of 3.75
This would be conventional 30yr mort.
I would again have to put 18k down to make the 20% equity.
Closing costs would be 4400, but that includes 2400 of escrow that I should get back from my old mortgage company.
Payment would be 1631 a month.

Wasatcher
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Joined: Fri Aug 27, 2010 3:00 pm

Re: Refi to rid myself of PMI

Post by Wasatcher » Thu Aug 20, 2015 2:47 pm

You may want to check out Amerisave. I've done several refinancings with them over the years and found them to have very competitive rates. What's nice is that you can plug in the basic parameters of your desired loan and they will give you an instant quote. No need to talk to anyone or provide personal information unless you want to pursue. Good luck.

Topic Author
moose83
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Joined: Tue Feb 04, 2014 11:45 am

Re: Refi to rid myself of PMI

Post by moose83 » Tue Aug 25, 2015 10:15 am

Just wanted to bump this up, as I need to make a decision wanted to gather as much advice as possible.

I seem to be leaning to keeping my current loan, paying the 18k to remove PMI and continue putting that 157 towards the mortgage.

Thanks again everyone.
moose83 wrote:Took me a bit to finally get this moving but here is where I am.

Just not sure what is the best option. Either one I have to fork over 18k to rid myself of the PMI. I'm ahead on my first loan by few years and on interest of course, should I just keep that guy and continue to prepay what I save(157 from PMI)? or refi and do the same but be on lower interest rate?

Thanks in advance.

Current Loan:

Original Principle: 420k
Current Balance: 370k
Rate: 4.25(had that wrong in first post)
First payment was made on 10/01/10
PMI is 157 a month.
Payment: 2,064 a month
I have been doing bi weekly w/ an additional 108 a month

I can remove PMI on my current mortgage by making a payment of 18k.

Or do a Refi

Appraisal came in at 440k
Rate of 3.75
This would be conventional 30yr mort.
I would again have to put 18k down to make the 20% equity.
Closing costs would be 4400, but that includes 2400 of escrow that I should get back from my old mortgage company.
Payment would be 1631 a month.

GuyFromGeorgia
Posts: 142
Joined: Sat Dec 29, 2012 12:16 pm

Re: Refi to rid myself of PMI

Post by GuyFromGeorgia » Tue Aug 25, 2015 10:44 am

About 6 years ago I had a FHA loan and here's what I remember. Prepaying to get the loan to 80% LTV would NOT have eliminated MPI. FHA required at least 5 years of that payment. Only option was to refi into a conventional loan. That's one of the differences. Conventional loans that are > 80% LTV have PMI and FHA loans >80% LTV have MPI. Conventional loans can be prepaid to 80% LTV and PMI goes away. FHA loans have to get refi'd.

Topic Author
moose83
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Joined: Tue Feb 04, 2014 11:45 am

Re: Refi to rid myself of PMI

Post by moose83 » Tue Aug 25, 2015 10:51 am

Thanks for the response.

I had talked to my bank and they said I reached my 5yr this August so I am able to keep existing loan and prepay to reach 80%. Does that not sound accurate because I am in an FHA now?
GuyFromGeorgia wrote:About 6 years ago I had a FHA loan and here's what I remember. Prepaying to get the loan to 80% LTV would NOT have eliminated MPI. FHA required at least 5 years of that payment. Only option was to refi into a conventional loan. That's one of the differences. Conventional loans that are > 80% LTV have PMI and FHA loans >80% LTV have MPI. Conventional loans can be prepaid to 80% LTV and PMI goes away. FHA loans have to get refi'd.

logicon
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Joined: Tue Mar 10, 2015 8:18 pm

Re: Refi to rid myself of PMI

Post by logicon » Tue Aug 25, 2015 11:41 am

I recently did this (albeit slightly different, USDA loan and USDA fee instead of PMI.)

I was prepared to pay ~$10k to achieve 80% LTV but the appraisal came in high and I got away with a no-cost refi at a lower rate (partially due to going from 30-yr to 15-yr).

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stilts1007
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Location: Chicago IL

Re: Refi to rid myself of PMI

Post by stilts1007 » Tue Aug 25, 2015 1:00 pm

We refinanced a couple years ago to get rid of PMI and get a better rate (went from 30 years at 5.5% to 15 years at 3.25%). Had to put a chunk of money down ($25k) but I know we'll kinda get that money back when we sell, and with the lower premium and interest rates, our monthly payment ended up being almost exactly the same. Definitely don't regret it.

GuyFromGeorgia
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Joined: Sat Dec 29, 2012 12:16 pm

Re: Refi to rid myself of PMI

Post by GuyFromGeorgia » Tue Aug 25, 2015 2:33 pm

How much does Zillow say the house is worth? Like the previous poster, you might have enough equity from an actual appraisal to avoid dropping a ton of cash. I would certainly look at a low or no cost finance option. Sell off 1/8th of a percent to cover closing costs if needed.

Topic Author
moose83
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Re: Refi to rid myself of PMI

Post by moose83 » Tue Aug 25, 2015 6:37 pm

Actually got an appraisal and came in at 440k. So I woud still need to put about 18k down on a new loan.

So I guess my question is, does it seem worth the 2k to refi(closing) to save .5% APR(4.25 current, 3.75 refi) and reset back to 30 years?
GuyFromGeorgia wrote:How much does Zillow say the house is worth? Like the previous poster, you might have enough equity from an actual appraisal to avoid dropping a ton of cash. I would certainly look at a low or no cost finance option. Sell off 1/8th of a percent to cover closing costs if needed.

Sourc3
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Re: Refi to rid myself of PMI

Post by Sourc3 » Tue Aug 25, 2015 7:32 pm

I recently went through the same scenario. In my case I had a $154/month PMI and 4.625% rate with a 30 year mortgage (26.5 left). After doing a lot of back and forth with a bunch of banks here is what I learned:

- Do not be afraid to ask banks to match each other, I kept doing this and got a 3.5% rate on a 20 year mortgage
- Look for banks that give you some sort of cashback. Chase is giving back 1% if you use a Chase checking account to pay for it
- Try to roll in the closing costs instead of paying out of pocket (I like the idea of a 20 year 3.5% loan for $10-15K, also in my case there are some tax offset)
- Make sure that you will reap the benefits in 5 years. For me the break-even was 5 years as well. However, I am not planning on selling my house.


Also, here is an alternative scenario to consider:
If you are into being a landlord one day, get the refinance done for 30 years, and try to buy your next house without selling this one. It is unlikely that the rates will stay low for your next house. Depending on where you live, you may even be able to generate some positive cashflow with your rental after paying the mortgage.

Good luck with your re-fi!

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