Avoid PMI with a refinance?

[FIRE_fighter]

5 years into a 30 year loan. Original FHA loan with $10K down was $235K. Interest rate is 3.25% but I will be losing $10,000 over the next 3 years paying the PMI off until I get the 20% paid. My house value has gone up but the mortgage company won’t take that into account in considering dropping the PMI. They suggested I might try to refinance to a 15 year loan as a way to drop the PMI. But I am guessing the closing costs plus an increase in my interest rate might offset the savings. Anyone have any input on whether or not the refinance would be worth it or should I just try and pay extra towards the mortgage to reach the 20% mark earlier?

[boarder42]

the rates are way too high right now for this to be economical.  your interest rate is amazing and your PMI is only adding a small percentage to your loan.  if rates were closer to where you bought then i'd say go for it but 3.25% fixed for 30 years - with your PMI probably only adding about .5-.75% to that still make the loan cheaper than what you could refi for now.

[frugaliknowit]

Instead of guessing, ask your lender to calculate it out.  If they won't, they are bozos.

Find a reputable lender to calculate everything out for you and send you a pdf.  From there, you can determine how long you have to keep the property to break even.  A very quick glance reveals you might be able to get 3.25% on a 15 year.  Your payment will likely be higher.

[Bourbon]

FYI for FHA loans they call it MIP instead of PMI.

I just did some basic research.

For loans closed after 06/13 - You can't get rid of it without refinancing.

For loans closed before(and it sounds like yours was) - You can get it removed without refinancing, but it is strictly tied to a loan balance under 78% of the original purchase price.

sources, which admittedly aren't 100% official -
https://themortgagereports.com/7570/fha-mip-cancel
https://www.sammamishmortgage.com/get-rid-fha-mortgage-insurance-without-refinancing/

[Bourbon]

Somewhat more official source -

https://www.hud.gov/sites/documents/4155-2_7.PDF

"FHA determines when a borrower has reached the 78% LTV ratio
based on the lesser of the
 sales price, or
 appraised value at origination (new appraised values will not be
considered).
Example: If the lesser of the sales price or appraised value at
origination is $100,000, when the loan amount reaches $78,000 FHA
no longer collects an annual MIP on the loan.
Reference: For additional information on LTV ratios, see HUD 4155.1
2.A."

4155.2 7.3.c
Automatic
Cancellation
of the Annual
MIP
For loans closed on or after January 1, 2001, FHA’s annual MIP is
automatically cancelled under the conditions outlined in the table
below.
Note: This MIP cancellation provision only applies to loans with a
UFMIP.
For mortgages with … The annual MIP is …
terms more than 15 years cancelled when the LTV ratio reaches 78%,
provided the borrower has paid the annual MIP for
at least five years.
References:
 For information on how FHA determines when a
borrower has reached the 78% LTV ratio, see HUD
4155.2 7.3.d.