I did the math. I could get a percentage point or two lower, but because of the lower value, I would end up paying PMI.
So take a couple hundred off of the payment, add a couple hundred for PMI, and it isn’t worth paying 5K to get refinanced.
Hey Tatertot
You should crunch the numbers using lender paid mortgage insurance. I typically find it much cheaper than to take the hit as far as MI goes. Now keep in mind this depends on the actual LTV and your credit scores, and the loan type, IE investment, rate and term or cash out?
Its certainly worth a couple of phone calls if you ask me??
Rastusracing,
Please tell us–what is “lender-paid mortgage insurance?” I thought the buyer always paid the mortgage insurance?
Furnishedowner
With (LPMI) Lender Paid Mortgage Insurance, the cost of MI is included in a slightly higher interest rate. Generally this results in a lower monthly payment because it is amortized over the life of the loan. LPMI is a good option for those that are planning on moving or refinancing with 10 years or may be making a larger down payment.
PMI is added to the monthly payment resulting in a higher payment. It will discontinue when a pre-determined LTV (loan to Value) is reached. Reccomended for those who are planning on staing in a property long term, are willing to make slightly higher payments and/ or expecting increase in property value.
Well said Mdhaas.
In most cases this is primarily offered or used on owner occupied properties as its these properties that most lenders will exceed an 80% LTV and therefore require MI because of that.
There are some limited investors that will go to 85 and 90% LTV on investment purchases and on those if they also offer LPMI or lender paid MI its worth taking the 5 minutes to crunch the numbers to see if it fits with what your game plan is with the property?
Some lenders also offer single premium MI so yet another option to consider if it is offered by the individual lender on the loan program that you are considering.
If you plan to refinance, just make sure you take advantage of a better interest rate.
Hey furnishedowner, I can’t give exact advice because I have not experienced it personally. But I have read somewhere that when you are considering to refinance, ask yourself the following questions:
- How many years into the current loan have you been into? (Moving into a new 20-year loan after 12 years into the current one does not make financial sense)
- How much amount have you got outstanding?
- How much has the interest rates decreased by?
- How much is the refinancing costs? (Government charges, discharge fee, deferred establishment fee, break costs, legal fees, etc).
- What is the time required to break even? (To get this, divide the various refinancing costs with the average monthly savings. If this is longer than the time you plan to live in the current property, then it is not worth it)
Rastus
you mentioned being able to go over 10 conforming mortgages,I thought 10 was the limit, what type of programs are you talking about, and would they be a better option than a portfolio loan,I can’t find portfolio loans that will lock in the rate for more than 3 or 4 years
andy
If they don’t refi you, since you obviously have excessive cashflow, why not just accelerate your payment schedule into a 15-17 year loan yourself? Just double your payments, or whatever is required. That’s what I would do…but only if you can’t refi.