FHA Streamline

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guitarguy
Posts: 1745
Joined: Mon Dec 20, 2010 4:10 pm

FHA Streamline

Post by guitarguy » Fri Dec 16, 2011 8:07 am

Is this worth looking into?

I have an FHA loan, bal is $101k, original loan amount is $106k. Rate is 5.125% / 30yr fixed.

Is this worth looking into right now? What considerations should be taken? Is there any downside??

I'm just curious, with all the talk everywhere about rates being so low, if I should investigate this.

sjb19
Posts: 363
Joined: Wed Mar 10, 2010 10:49 am

Re: FHA Streamline

Post by sjb19 » Fri Dec 16, 2011 10:30 am

Definitely worth looking into. Last I checked below 4% was readily available at a 30yr FHA. If you are still paying mortgage insurance the math is a bit more nuanced. You will need what they call a "net tangible benefit" of 5% or more in lower payments (principal+interest+mortgage insurance) to qualify for a streamline into a new 30 yr loan. The interest rates obviously works towards lowering your payment, but depending on when you took out the loan, the mortgage insurance rates may be much higher now, which counteracts some or all of the gains. Also note you may be trading tax-deductible interest for non-tax-deductible mortgage insurance payments. Just run the numbers. Refinancing into a shorter loan may have different requirements.

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Ice-9
Posts: 1230
Joined: Wed Oct 15, 2008 12:40 pm
Location: Rockville, MD

Re: FHA Streamline

Post by Ice-9 » Fri Dec 16, 2011 9:07 pm

I did an FHA Streamline Nov 1. Previous mortgage was 5%. For no cost, refinanced at 3.875%. Could have been 3.75% with points, but I didn't want to do that.

One thing to keep in mind is that FHA rules changed at some point in 2011, and new FHA loans pay higher mortgage insurance premium each month than 2010 and earlier. Doubled in fact. My savings from lowering the rate made it well worth it, however.

Also, FHA lets you get off the mortgage insurance once you've (1) achieved 22% equity and (2) held the loan for five years. With the refinance, that 5-year clock starts over again.

You can refinance again six months later as long as your new loan will decrease your monthly payment by 5%. I'm making plenty of additional payments to get to that point by May just in case FHA rates do hit 3.5% or lower by that time.

Good luck!

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