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Conventional refi question

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Mama-j
Contributor

Conventional refi question

So I have been trying to figure out if it's better to refi under conventional loan or streamline FHA. I haven't gotten any numbers for FHA, but have gotten one for conventional and I'm trying to figure out what this means.

The interest rate is 3.75 % with 1.375% discount points. Does this mean I would be paying 5.125 in interest? Because then it doesn't make sense to me. Right now I'm paying 3.75% + 1.25% PIM so total of 5%, did I calculated this correctly?

My mid score is 720 EX, can I get better rate?


Starting Score: 2/22/12: EQ 530, TU 553, EX 528(lender). 12/4/12 (rebuilding starts)= EQ 599.
Current Score: 1/4/16: EQ 743, TU FICO 724, EX 737.
Goal Score: 750 all across.

Take the FICO Fitness Challenge

Message 1 of 4
3 REPLIES 3
Anonymous
Not applicable

Re: Conventional refi question

How much equity do you have in the property? If you have 20% equity you can drop your mortgage insurance if refinancing into a conventional loan.

 

You will need to compare the costs/payments of the two loans to evaluate which is better for you. You do not add the PMI or discount points in order to get the overall rate.

 

If you paid 1.375% discount points it means you are paying 1.375% of the total loan amount in order to "buy down" the rate. If you pay no points, your rate will be higher.

Message 2 of 4
Mama-j
Contributor

Re: Conventional refi question

Thank dpeezy. Yes, I do have enough equity to drop my PMI. With the conventional loan quoted it will be without PMI.  So it will be better to get loan with points to keep rate low if I can afford it?


Starting Score: 2/22/12: EQ 530, TU 553, EX 528(lender). 12/4/12 (rebuilding starts)= EQ 599.
Current Score: 1/4/16: EQ 743, TU FICO 724, EX 737.
Goal Score: 750 all across.

Take the FICO Fitness Challenge

Message 3 of 4
Anonymous
Not applicable

Re: Conventional refi question


@Mama-j wrote:

Thank dpeezy. Yes, I do have enough equity to drop my PMI. With the conventional loan quoted it will be without PMI.  So it will be better to get loan with points to keep rate low if I can afford it?


It depends. You have to weigh the cost of the points vs. the monthly savings it will bring.

 

For example, if the 1.375% points costs you $3000 and saves you $50 per month with the lower rate, it will take you 60 months to break even ($3000 divided by $50).

 

If you think you will keep the mortgage without refinancing or selling the home for several years, it may make sense.

Message 4 of 4
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