07-03-2014 09:32 PM - edited 07-03-2014 09:38 PM
I have a FHA mortgage that is 4 years old. I owe 214K on it. The interest rate is 4.5%. The value of the home is 235K. Can I refinance it? What are my options?
Thanks for you help.
07-04-2014 05:04 AM
I am not an expert but I don't think a refi will help you. Without 20% equity you will not avoid PMI. Right now you have 20k equity a large part of which will be lost to closing costs. What's the purpose for the refi?
07-04-2014 09:29 AM
You could refinance into a new FHA loan and get a lower interest rate, but the mortgage insurance would now be for the life of the loan (whereas currently it will drop off after at least 5% years and when you pay your mortgage balance down to 78% of the value at the time you got the loan). You could refinance into conventional and get a similar interest rate, and pay .59% per year in mortgage insurance (assuming a 760+ score)... but I believe your mortgage insurance is being calculated at .50% per year if you got the mortgage between 4/5/10 & 10/4/10.
07-04-2014 09:39 AM
JUst for my clarification, if the loan value drops below 78%, I wont be paying the PMI, but if I refinance using FHA now I will be paying PMI for the entire loan. I dont mind waiting a few more years. Thanks for you help. Is a fixed rate or ARM better over the long run?
07-04-2014 09:43 AM
That is correct, new FHA loans now, with loan-to-values over 90%, will pay PMI for the life of the loan.
We are in a time where interest rates have remained low for an unprecedented amount of time, so historically I'd say a fixed rate is better in the long run... but if someone got an ARM back in 2003-2004 they would've done better than someone who got a fixed rate back then.
Forums posts are not provided or commissioned by FICO. Forums posts have not been reviewed, approved or otherwise endorsed by FICO. It is not FICO's responsibility to ensure all posts and/or questions are answered.Advertiser Disclosure: The listings that appear on myFICO are from companies from which myFICO receives compensation, which may impact how and where products appear on myFICO (including, for example, the order in which they appear). myFICO does not review or include all companies or all available products.
* For complete information, see the terms and conditions on the credit card issuer’s website. Once you click apply for this card, you will be directed to the issuer’s website where you may review the terms and conditions of the card before applying. While myFICO always strives to present the most accurate information, we show a summary to help you choose a product, not the full legal terms - and before applying you should understand the full terms of products as stated by the issuer itself.
IMPORTANT INFORMATION: All FICO® Score products made available on myFICO.com include a FICO® Score 8, along with additional FICO® Score versions. Your lender or insurer may use a different FICO® Score than the versions you receive from myFICO, or another type of credit score altogether. Learn more
FICO, myFICO, Score Watch, The score lenders use, and The Score That Matters are trademarks or registered trademarks of Fair Isaac Corporation. Equifax Credit Report is a trademark of Equifax, Inc. and its affiliated companies. Many factors affect your FICO Score and the interest rates you may receive. Fair Isaac is not a credit repair organization as defined under federal or state law, including the Credit Repair Organizations Act. Fair Isaac does not provide "credit repair" services or advice or assistance regarding "rebuilding" or "improving" your credit record, credit history or credit rating. FTC's website on credit.