Am I wrong or is my loan officer?

[John Kurtis]

I got into a debate with a loan officer from my mortgage company on the phone. He wants me to refinance my FHA loan with 3.5% interest and 148$ Mortgage insurance premium, To a conventional loan with the same but maybe slightly higher interest rate but no MIP. I have about 24 years left on my loan so I said I'd wanna do a 25 year conventional to keep my payoff date the same.

He told me my payment would be about $1900 with no MIP and a 25 year loan. Vs my current payment of $1868. So I said there's little benefit to me bc I'm paying off the loan the same year and I pay slightly more every month to reach that end goal. So why would I refinance? And he kept telling me "I mean no disrespect but do you not see the benefit of not wasting 148$ on MIP every month?"

I get what hes saying, but a higher payment with the same amount of time left on the loan, am I ignorant for not seeing the benefit? Help.

[JD Martin]

Your payment won't change but your principal owed will change faster. The $150 you were paying for insurance now comes off the interest & principal of the loan. The flip side of that is they're probably financing in your closing costs, which brings your principal costs back up. In essence, you are correct in that assuming you are holding to maturity there's no benefit to you - and once you have 20% equity in the house you should be getting the PMI removed anyway.

Bottom line is you are probably worse off with your loan officer's offer. Higher interest rate + closing costs + one added year of loan length payment > remaining principal payment + lower interest + PMI.