Does it make sense to take advantage of today’s rates while resetting your mortgage insurance AND taking a higher mortgage insurance rate?
As a loan officer, this is definitely one of the most challenging questions we face when handling a refinance. Especially when FHA Mortgage Insurance will be on the rise again April 1st 2013.
In order to take advantage of today’s rates when refinancing an FHA mortgage there are two major things to consider.
1 – The Proposed Rate vs. Your Current Rate – how much interest will you be saving monthly? What are the long and short term benefits and consequences?
2 – Your Proposed Mortgage Insurance vs. Your Current Mortgage Insurance.
FHA Mortgage Insurance seems to change roughly about once a year. It doesn’t seem to go down either. Know that when you refinance out of your current FHA loan and into a new FHA loan you WILL be paying higher mortgage insurance unless your FHA loan was endorsed prior to May 1 2009.
When refinancing an FHA loan into another FHA loan you must consider the upfront mortgage insurance you are going to be charged as well as the monthly mortgage insurance you are going to be charged. While the interest savings could be phenomenal and a “no brainer”, once you factor in the addition of both up front and private mortgage Insurance your savings may not add up to what you originally thought you were saving.
Not to mention you are resetting your mortgage insurance on your loan. FHA mortgage insurance is set to stay on your home loan for a fixed number of years or to a 78% loan to value. You may have been paying mortgage insurance for the last 3 years and this will re-set when doing a streamline refinance.
That being said, with the changes to mortgage insurance coming soon, your position to refinance will make less sense in a couple months than it does now.
This may be a good time to pull the trigger.
For honest accurate advice feel free to contact me via phone 510.282.5456, orCLICK HERE fill out our quick form and we will be in touch.