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LPMI with higher rate vs lower rate and monthly PMI

I purchased a home about 7 months ago with an FHA loan.
The new FHA MIP rate is killing me.  (about $275/month)

With rates lower now, I looked into refinancing.  With extra cash I have now, I can hit 5% equity.

Refinancing to a convential loan will reduce my rate and the bank has cheaper PMI, reducing my overall monthly payment.

They also offered to pay all of my PMI upfront, in exchange for a higher interest rate.

This new rate would actually be higher than my current FHA rate, but because I'm removing all PMI, it's the greatest monthly cost savings.

I understand that PMI would go away on its on once I obtain 20% equity or in about 7 years.  Are there any calculators out there to figure out my break even point?

With LPMI re-fi I can save $300/month compared to current payment.

Or with Lower Rate, I can save about $200/month for 7 years, then another $200/month once PMI goes away.

I only plan on staying in the house 7 to 10 years, but you never know what can happen.

One last question, am I eligible for any type of refund for the MIP I paid to FHA?

Any info would help.  Thank you
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March 28 2012 - Alexandria
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Answers (2)

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Lender is saying original 30 yr rate is 3.875%
They can pay all closing costs, bumping it to 4.125%
They can all Lump sum upfront Mortgage insurance for a rate of 4.625%

Loan balance is $238K. 

Thank you for responding Clay
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March 28 2012
You probably answered your own question, take the lender paid MI if staying 7 or 8 years. What interest rate are you being quoted for the LPMI option and what is the loan balance?

No refund on the FHA UFMIP unless you refinance into another FHA loan.
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March 28 2012
 
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