Should I refinance?

[VALoanMaster]

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@Anonymous wrote:

Hello,

First time poster here, bear with me!

We have a house we bought in 2012 for $165k.  The market has obviously increased quite a bit since then, and Zillow and RedFin both estimate our house at about $240k.  I'm not sure how much it would appraise for, I'd guess closer to $225k.  

Our rate right now is 3.25%, our payment is about $1,080, we owe just over $144k and it is a 30 year loan.  We are paying PMI because it was a USDA 0% down loan.

I'm wondering about refinancing.  It looks like we can refinance for another 30 year for about 3.9%, but it would lower our monthly payment to under $700/month.

Alternatively, we could do a 15 year for about 3.2% and our monthly payment would be around $1,020. 

I've done this all through online quotes and estimates so I know it isn't all that accurate, but if that is a ballpark, does it make sense for us to refinance?  We are relatively comfortable with our current mortgage, so we could keep it the same and be just fine, but having some more breathing room would always be welcome.

I don't know anything about the costs of refinancing, other than lender fees, appraisal fees, and maybe a title/escrow fee?

Does it make sense for us to refinance?

Appreciate in advance!

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Hi Celticmoose,

You are comparing PI payments to PITI payments above. See lines in red.

Do Not Even Consider A Refinance!

You have a 30 year fixed rate at 3.25%! If you want to pay your mortgage off early, do yourself a favor & stay on the 30 year fixed loan & send an extra, separate payment each month to your principle.

Here's why I say this:

1) You are at least 5 years into your 30 year fixed loan. When you look at the amortization schedule you are at the point now where almost 50% (at month 60 you're at 44%) of your payment is going towards your principle! There is no reason to refi to a 15 year fixed and start all over especially if the rate isn't lower then your current rate.

2) Your MMI (monthly mortgage insurance) is only running you about $42 per month & it's going down every year because it's based on the principle balance of your loan.

That means you can actually reduce how much you pay in MMI over the life of the loan by paying down the balance faster.

3) Let's just say the closing costs to refi are going to run you $4,500. It's going to take you 9 years to recoup the $4,500 just based on you eliminating the MMI. This doesn't factor in the change in your Principle & Interest payment if you do the 30 year fixed with a higher rate. It also doesn't factor in the fact that the MMI goes down each year.

If you're comfortable with your current payment, there is no reason to change it.