The change between your current loan and the new loan reflects the change in MIP for FHA loans.
When you got your original loan, it was probably Upfront - 1.75% and monthly - .55%
Now it is, upfront - 1% and monthly 1.15%.
You will get a partial refund for your upfront premium you previously paid if you refi to another FHA loan, but will still pay the new upfront. Your monthly MIP will obviously more than double.
It is good that your loan amount isn't increasing...i'm assuming you are going to pay all the closing costs and upfront MIP in cash? ou said due at closing was only $1,500, but it appears it should be more than this considering impounds/upfront MIP/origination fees if you aren't rolling the fees into the loan.
Anyways, the easiest way to determine if it makes sense or not is to calculate the amount that it costs you to refinance and divide that by your monthly savings. You will quickly see your breakeven point in months to determine how long you would need to stay to make it worth it.
Keep in mind: with the increased MIP and re-starting your loan, you are not going to be paying much at all towards principal. Your equity will grow extremely slow the first 5 years, and you wont see the true benefit of the lower interest rate until after MIP drops off at 80%.
Starting Score: 627 EQ, 621 TU - 11/15/08You will get a refund on a portion of your upfront MIP previously paid, but the refund amount decreases each month. After 3 years, I don't think there would be enough refund to cover the new MIP payment. Anyways, don't let the deduction for mortgage interest sway you that much. Keep in mind that once you are only getting a benefit from the amount of interest/taxes etc. paid after subtracting the standard deduction amount, and the difference is multiplied by your tax rate, so if you were in the 20% tax bracket... the deduction difference is only $20 in savings for every $100 paid. Not a whole lot imo.