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Should I refinance FHA loan?.

Current FHA loan taken out in 2009 on 30yr FHA at 5% currently owe $120,103.04. Monthly pament is $961.65 (683.31 P&I, 229.05 taxes and 49.29 PMI). My current escrow balance is $1,927.80

Proposed refinance would be 30 yr FHA streamline at 3.75% for $121,115.00 (not sure why this is higher then my current loan balance as I didn't think they could roll in costs to the FHA refinance)

New monthly payment for principle, intrest and PMI is 615.91 (not sure what the actual PMI is)


Good faith estimate includes a adjusted origination charge of -1,057.42 broken down from a origination charge of 1,595 and a credit of 2,652.42.

Other settlement charges (credit report, flood certification upfront PMI, title insurance, recordingcharges daily intrest) 1,460.31 and initial escrow acct deposit of 1,069.71.

So with the credits it looks like my closing costs including prepaid escrow is 1472.60.

We would plan to stay in this home at least 3-5 more years. Does this make any sense to do?



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October 26 2012 - Staten Island
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From a pure numbers perspective, you are saving 0ver $300 per month on your monthly payment, thanks to the new interest rate. You will make up for the out of pocket closing costs in a matter of a few months.

There are some questions you should ask yourself - If you are planning to live in the home only 3-5 years, and your can afford your current monthly payment, is it worth keeping your current mortgage?

The new loan will reamortize over 30 years with heavy portion of the montly payment going towards interest in the first years of the loan. This means less paydown of the principal as time moves toward your 3-5 year sunset date. When you go to sell your home in 3-5 years, you will have paid off less of the principal balance with the new loan than you would had you kept the orginal loan.

This will take a deeper dive with you and your loan professional. Find out how much principal will be paid off in 3-5 years in comparision with what you have now. 

Lastly, check with your tax professional to see how you will be impacted (mortgage interest and points is tax deductible in most cases - your taxes may be affected).

You will need all this information to make the best determination for your situation.
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October 26 2012
 
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