Question on refinancing

11 Replies

Bought a primary residence with 10% down. Property has appreciated in 6 months so I can refi myself out of PMI. However, interest rate is going up by .125% and i have to pay closing costs of 2500. Is that normal? Total monthly savings is around 225 after all this.

The interest rate is nominal at this time. What's the breakdown of the closing cost?

Originally posted by @Rashmi Nigam :

Bought a primary residence with 10% down. Property has appreciated in 6 months so I can refi myself out of PMI. However, interest rate is going up by .125% and i have to pay closing costs of 2500. Is that normal? Total monthly savings is around 225 after all this.

Multiply the monthly PMI by 12 and divide by the original loan amount to find the PMI's effective interest rate impact, and tack that onto your current interest rate. I'm guessing you will find that your rate isn't actually going up at all.

For example if the monthly PMI is $197 and you borrowed $400k, that's $197*12/$400k = 0.59%. Meaning if your nominal interest rate is 4.5%, it's actually a tad over 5% due to the PMI.

Originally posted by @Rashmi Nigam :

Bought a primary residence with 10% down. Property has appreciated in 6 months so I can refi myself out of PMI. However, interest rate is going up by .125% and i have to pay closing costs of 2500. Is that normal? Total monthly savings is around 225 after all this.

 Make sure that it has been 6 months since you've made the first payment.  To be on the safe side this will ensure that you can use new appraised value instead of just using the purchase price as the value.  

If total monthly savings is 225 and the cost is 2500, you will make your money back in 14 months and continue to save for the life of the loan. No brainer in my opinion, get that rate locked in!

@Rashmi Nigam Jack Martin is right. Pull the trigger. I’d also inquire with the lender, will they drop PMI at 78% LTV? Some will do so without having to REFI, might just cost you an appraisal for $400-$500. Worth asking.
@Rashmi Nigam Not much to even consider here IMO. Your getting a 225 monthly payment decrease and getting out of PMI. You make this money your paying for closing back in a little over a year, on a 30 year loan that's no time.
Originally posted by @Dane C Allen :
@Rashmi Nigam

Jack Martin is right. Pull the trigger. I'd also inquire with the lender, will they drop PMI at 78% LTV? Some will do so without having to REFI, might just cost you an appraisal for $400-$500. Worth asking.

Yep this is exactly how my brother just got the PMI dropped from his primary. Simple appraisal no refinance necessary.