Should we do a streamline refi or wait?

[Rodzilla79]

Hello,

I haven't seen this question asked so here it goes:

My partner and I were financed for a home last July.  Only she is currently on the loan as I had a recent job change and some spotty marks on my credit when we closed.  So know we are thinking are getting as streamline to drop interest a little.  Here are the particulars.

FHA loan 7/14

4.25% interest

House appraised at 180,00. Bought for 173,500.

Our current reported unpaid principal is around 168,000.

Current bill is 1272.00 a month.  

To refi with our current lender, we would be looking at paying 1178.00 a month, so we would save 94.00 a month.  We would pay our portion of the new with equity we have in the home (about 7,000) and the lender would cover closing costs.  The new loan would be a little more than 170,000 and the new interest rate @ around 4%.

My question is would this worth it for us? We plan to stay in the home and even if we did leave the home, we may try to keep it as a rental property.  We also want to get out of the mortgage insurance since it's the life of the loan and refi to a conventional eventually.  I am not sure using equity now to save about 1200.00 a year is worth it, but than again that's why I am asking for guidance!  Sorry to be so wordy but any advice on this would be helpful. Thank you!

[Revelate]

Play with a compound interest calculator if you want data, but that's not a bad deal at all even looking at historical market returns ($100/month invested over 30 years is pretty much double what 7K today is worth in 30 years).  This is utterly based on your keeping the house for the long term, it all falls apart if you're looking at substantially less time.

I'd also add that if you're trying to convert things to rental later, the cheaper the payment you have the better chance you'll have of making that happen in the future.  $100/month is worth something like $230 monthly gross income on a 43% DTI calc and for many people that's non-trivial.

Don't know what market will be like in a year but pretty certain we're going to be higher rates in 3-4 years short of another major collapse which I'm not betting on anyway, so if you're looking at a FHA Streamline refi now, might make sense to look at conventional or other loan products too depending on your current credit strata.

[Rodzilla79]

Thanks for the advice.  I was looking at taking the savings and making extra payments on the home but maybe inversting it in something is a better option.  Appreciate the reply!