I obtained an FHA loan for 240k at 5% with PMI back in April 2009. In 2013 I received an offer in the mail to refinance my loan to a streamline FHA loan to 3.5% interest rate, the mortgage company didn't lock me in time and I wound up with a 4% FHA streamline loan. I read that PMI drops off automatically when you reach 78% of the debt to equity ratio but was recently told that this would not be the case and I would be paying PMI for the life of the loan since I refinanced into new FHA guidelines in 2013.
I recently received an offer in the mail to refinance out of my 225k FHA loan into a conventional loan at 4.375% interest. I would not have to pay $103/ month for PMI but would have a .375% higher interest rate. I want to make the best decision possible and would like to know if anyone thinks this is a good deal?
The best answer I can give you is "it will depend." First FHA has two fees one portion is paid upfront (Look at your HUD) AND they also have a monthly premium this is for the LIFE of the loan, in other words, it will NOT drop when the loan to value reach 80% (78%). The 80% (78%) rule is for conventional mortgage. The PMI can drop when ORGINAL the loan to value reach 80% but mandatory at 78%.
You will have to do the numbers based on how long you plan to keep the loan, do NOT compare the numbers over 30-yaers (unless you really are going to keep the loan for 30-yaers). Multiply current payments to the new payments and see if it will be worth it.
@Robert M. undefined,
You forgot one powerful piece of information, IMHO.
I am refinancing from my FHA 3.25% 30yr fixed rate loan (+MI, where MI WILL roll off in 6 yrs) into a 4.5% conventional 30yr fixed. What!?!
I'm pretty sure that someday I will want/need to be able to use an FHA loan to get into an upgraded primary residence (1-4 units) in the future in the high-cost Bay Area. Not having an existing FHA loan is one of the only ways to do it, except for rare special circumstances or moving way out of the area (difficult to pull off I've heard.
What is the value of being able to put less than 5% down on an owner-occupied 4 unit property up to $1.2MM (in my area at least)? What is the value of being able to use FHA in the future when you need it to buy an upgraded primary residence for you and your family?
If this means something to you, don't worry so much about how sharp your pencil is on the calculations. Think about what it means for your acquisitions/leverage in the future. If you're never going to buy FHA again, then stick to the spreadsheet, and remember the time value of money - using your discount rate - knowing the investment options you have available for your capital..
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