How soon is too soon to refinance

Question

Hey BP!

I have a question. How soon is too soon to refinance. I have a rental property that I’ve had for 3 Years. I Which I’m currently paying $2700 per month on. Which includes food insurance, home insurance, and PMI. I recently got offered a chance to refinance out of this FHA into a conventional and  to get rid of the PMI Insuance which can save me at least $300 per month. My current interest rate is 3.5. I was quoted at 3,8. Does It make sense to do this refi right now? Just curious because I was talking with a relative that I’m RE and she mentioned that it’s way too early to start refinancing.

Any thoughts? Thanks!!

Nicole Heasley Beitenman · Answer

I refinanced my former primary while it was still my primary because I thought I wanted to buy a duplex with an FHA loan so I could house hack a MFH instead of a SFH. Instead, I ended up moving in with my boyfriend after trading in my 3.5% interest rate for a 5.25% interest rate and basically resetting my mortgage. Huge, gigantic, terrible mistake. I don't think it's a bad idea to refi in your situation. I'm just sharing my experience so you don't make the same mistake I did. Be sure you know your numbers with and without the refinance before you mess with a good interest rate.

Jonathan Escobar · Answer

@Karen Jackson with refinancing, it is very tricky. What I would do if I were you, is go to your lender. If you don’t have a lender go to multiple lenders and even if you do have a lender, talk with other lenders as well and have them show you what would happen if you were to refinance versus staying on the FHA loan. They will have the most information and will have the proper tools like calculators to tell you what would be the most beneficial for your situation. The lender will be able to get all the details in numbers that he needs in order to show you what the best possible scenario would be.

But rates are low right now with high prices. If you bought your property at a high price anyway and the rate lowered then that might be a good thing to do. But if the market drops, then your property won't be worth as much and you won't be able to refinance and your chance will be gone. So take that into consideration.

Jim Blackburn · Answer

@Karen Jackson

Would you like to keep the $300/mo FHA mortgage insurance forever?

Does it make sense to go through the process of removing the $300/mo mortgage insurance while interest rates hit are at their 3 year bottom or wait for rates to go back up before refinancing?

Are you planning to keep this property for 2 years or is there a 50% or greater chance that you may sell it and use the equity to purchase another property?

Is this property in a romantic area that will attract renters for the next 10-15 years -or- is it in a less desirable area that could cause you headache to rent it out?

Jim

Kerry Baird · Answer

I suppose the math will tell you.  How many months of $300 mortgage insurance = cost of refinancing?  It looks like it would take about 16 months for all of those $300 a month MI payments to equal an estimated closing cost of $5000.  After that, you are ahead of the game.

How soon is too soon to refinance

Most Popular Reply