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Should we refinance with FHA Streamline?

We are looking into refinancing our home.  What are the Pros and Cons of our situation and do you recommend a refinance?

Our situation: We may move within two years, but want to take advantage of possible mortgage interest savings that don't interfere with moving plans in the next two years.

Purchased: September 2008
Original Mortgage Balance: $97,500
Terms: 30-year FHA, 6% interest

Current Mortgage Balance: $89,950 with monthly $574.11 principal/interest and 147.68 per month into escrow.  Our FHA MIP is $40.71/month.  Credit is great.

We are being quoted a few options...one is a streamline 4% with no closing costs, and I am told that we can lock in our MIP because our FHA loan originated before May-2009. Another loan option is 3.5-3.75 with varying closing costs.  

Should we refinance?  If so, do you recommend the 4% option for our situation?  Finally, is there any downside to refinancing in general?

Thank you!
  • March 05 2013 - Indianapolis
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Answers (5)

Your needs are very short term. It won't pencil out to pay fees to buy a lower rate. Make sure your loan is not increasing in amount in these estimates.
Get quotes on the same day. Compare the number of days they are quoting for the rate lock, and ask for some assurance they can close in that time frame.
Pro: You can save a little more than $2000 in interest
Pro: You might stay longer than 2 years
Con: It takes patience to gather and submit the paperwork
Con: You are adding years and time to the payoff

Refinancing is a sensible idea, as you never know what the future might bring...
  • March 05 2013
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Travis is completely right. The FHA will be raising the MI in April 2013 and then again (so Mi lasts for the life of the loan) in June 2013. Right now is the perfect time to streamline your home before it is too late
  • March 05 2013
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Since you are planning on moving possibly in 2 years, a no cost streamline would make sense. No cost meaning not increasing your loan balance either. Looks like savings could be $130 a month and payback is zilch since there would be no cost to calculate.
Better news is yes you will NOT be impacted on FHA loan changes implemented on 4/1/2013 re higher MIP as streamline refinances where loan was originated prior to 5/09 is excluded.  You will want to go forward prior to June 3 to avoid MIP remaining for 11 yrs. (30 yrs if loan to value was over 90%)
  • March 05 2013
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Very simply put yes you should do this loan if you plan to stay in the property for a long period of time.  I would also urge you to get started ASAP.  FHA will be changing their guidelines in the next few months to make it much less desirable. A new loan between 3.75-4% sounds about right for the streamline based on today's rates.  This type of transaction has very little downside because there is no money out of pocket and all of your fees will be paid for by the bank.  You also will not have to order an appraisal to get this loan.
Best of luck!
  • March 05 2013
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You simply need to compare all of the options that were given to you vs. your current loan and see when the break-even point is. You have provided all the necessary info for me (or anyone else for that matter) to prepare one for you. Please feel free to contact me if you would like me to email to you.
  • March 05 2013
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