Should i refinance at a higher rate ?

Question

Hi Guys, I would like to get some advice regarding my mortgage and whether I should refi or leave the payment as it is.  My real estate taxes and HOA are about to increase . I receive  $1450 for rent.

My currently mortgage has a principal balance of $115k with 4% interest. I had the mortgage since 2012 and an original loan of $168k. I paid down the principal down substantially and my monthly payment is $1204.  I expect this to increase because the HOA dues and real estate taxes will bring the new payment to $ 1416.  If I refinance the payment will be $1018. I really just want positive cash flow on a monthly basis, but will i be increasing my debt in the long term with refinancing at 4.5% ? I have 18 months left on my current mortgage to continue paying Mortgage Insurance that will total $2532. I will have to buy the rate down at $1500 to get it to 4.5 %.  The lender is paying ALL closing costs. They are not adding it to the back end of the loan either.  Is it worth it ?

Jon Magnusson · Answer

I think you answered your own question in your question! ... You don't cash flow if you're out of pocket is the same as your income.  Nice thing here is you have a tenant paying down your mortgage.

Justin Tahilramani · Answer

Don't bother refinancing just to "cash flow" - wait until you can get a better rate and no PMI. Have you looked into Penfed for refinancing?

Mike Hartzog · Answer

I agree with the others who have responded.  I wouldn't mess with a loan at that rate unless absolutely necessary.   Doing the math, it looks like your PMI is about 140/month right?  If that's right, once that is out of the way you will be in positive territory again.  You should also ask them to remove it now.  Based on the numbers you have provided in the post, you are already paid down below 80% of original value threshold.  Check out this CFPB article.

Yoochul C. · Answer

how about getting a heloc on the amount you owe.  you said you paid down the debt substantially right?  You can use the heloc to pay off the mortgage.  I don't know if this a better option for you.

Should i refinance at a higher rate ?

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