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  • NVA
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Decision to FHA Streamline or not...please help!


I had trouble finding a tool or calculator to decide whether is it worth it now, with interest rates so low, to refinance using FHA Streamline?

My FHA loan was originated in November 2009 and was appraised at $259k at the time. More details:

Original Loan Amount: $252,345.00
Current Principal Balance: $244,391.48
Interest Rate: 4.75%
Term: 30 years (Fixed)
Loan Type: FHA Residential/MIP

I tried speaking to my lender a few months ago, when rates were in low 4% region and they said that it was probably not worth it for me to do so. But I am seeking for an unbiased opinion now that rates are even lower.

I know my interest rate is relatively low, but is it worth it to take it down by another percentage point or so and what sort of closing costs could I expect to pay? I would like to reduce my monthly payment, of course, but would like to also know the "pay back" period of any costs I may incur.

Thanks so much!
NVA
  • December 13 2011 - Falls Church
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Answers (5)

When a refi that offers a twenty percent reduction in your interest rate, with no increase in loan balance, doesn't make immediate sense, it could only be the governments fault. Thanks Washington, for screwing up something else.

I like Justin's (Clay and Shap too, thumbs up) detailed analysis. If you are a real homeowner, not a short term, live here until I make some cash off this house type, and you sound like you are, it makes great sense over the long run.

If you did the refi, the way Justin suggests, and had to move, before the MI came off, you haven't lost anything. You just haven't gained as you should have, before the unintended consequence Washington BS MI changes are considered. I'd be doing it, now, before rates bump up.

Some brainiac needs to make a new FHA refi calculator. If Zillow added one, it would quadruple the practical value of their little media event. MAybe, White Picture could do it on his site, homesand.net.
  • December 13 2011
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An ideal structure is to get all closing costs including the new UFMIP paid with a closing cost credit, make one payment into closing (instead of skipping a payment), and if allowable by existing servicer and new lender, have your current impound account "netted" from your payoff.   If done properly, you'll be able to complete the refinance with a balance less than your current balance.  

This "no cost" version ensures you won't have any pay back/break even concerns.   

The key is to make sure you pass the Net Tangible Benefits test to be eligible, newPIMI/oldPIMI must = <.95.    If you can do this, then you'll be looking at two phases of savings.

The initial phase will be immediate from reduced principal and interest, however much of this will be offset by the likley doubling of your MI payment.    The second phase will be when you MI drops off, after 5-10 years depending on your initial appraisal value.  

Example 1,000 PI + 100 MI vs 800 PI + 200 MI.   Immediate savings would be 1,100 vs 1,000.   Longer term the 1,000 eventually becomes 800.

A properly structured no cost, no balance increase streamline that meets the benefit test is almost always worth doing, especially so if the existing FHA loan was orignated in the last 6-36 months.
  • December 13 2011
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What they both said is correct.  Really no savings to speak of + you probably won't be able to save the 5% required to do the program - even if you wanted to do it anyway.

  • December 13 2011
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Dittos to shapiroamg's post. You will save about $100/month and estimating the payback period to be aprx 15-20 months.
  • December 13 2011
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The issue is not the rate but the FHA mortgage insurance. Most likely your prossible monthly MI payment will at least double your current payment eliminating most of the savings in refinancing.

If the FHA really wanted to help, they would keep a borrowers MI payment at the same rate as when it was originated. Kind of like a refi plus for govvie loans.
  • December 13 2011
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