Current loan: 250,000 at 4.3% (225,000 I'm paying, $25,000 in a Jr. Loan from forbearance) interest rate is 3.5% with .8% on PMI.
. . .
New Loan Amount: $326,400
If somebody is willing to loan you $326,400, then why are you paying 0.8% PMI?
I am assuming that $326,400 is not 100% of current home value, but even if it is, you are currently at 76% loan to value ratio. Request that your lender stop the PMI based on the loan amount now being below 80% of the home value. You might need to pay the bank for an appraisal (but you were going to do that to get a refinance anyway, right?). Presto, 3.5% mortgage rate, saving you more each month than the student loan payment. Just be sure to apply that savings to one of the debts as an extra principal reduction each month.
What is a $25,000 Jr. loan from a forbearance?
In short, though, no, I would not trade your 3.5% loan for a 5% loan over the next 30 years of your life. What about this math looked "good" to you? You claimed this was for "cash flow" while your wife is not working, but you say you are "comfortable" making the monthly payments, so cash flow is not needed.
3.5% is far better than you can do today on a 30 year mortgage with excellent credit (it's better than you could do on a 15 year mortgage, too). Don't refinance unless you can get a lower rate.
I'll try to answer your questions here.
If somebody is willing to loan you $326,400, then why are you paying 0.8% PMI?
- Essentially, I bought the house back in 2019 with an FHA loan at 5%. I recently went through a loan modification and they reduced it to 3.5%. The loan officer I was just speaking with this week mentioned I am paying .8% on PMI. Why am I paying PMI? I am not sure. I called my mortgage company to ask if I can get this taken off my loan as the value of my house is around $410,000 and I bought it for $252,000. I put about $100,000 in renovations over the last year and has yet to be appraised. When I spoke to my mortgage company, they said I would need to refi the loan or pay for something like 12 years.
What is a $25,000 Jr. loan from a forbearance?
- When covid happened, we opted for the forbearance because my wife lost her job and we became a single income family. At the time, I also changed jobs which reduced my salary by 7k a year. So, I did not make payments for a while and have recently starting making payments since the beginning of this year. I did a loan modification with my mortgage company where I now have my current mortgage I pay, and then the junior loan which is to be paid when I refi or sell the property.
I wasn't considering doing the refi option, what happened was I was looking into doing a HELOC or something to tap the equity in my house so I can put in a new fence and do some excavation work in my back yard. Unfortunately, my current mortgage lender does not offer HELOC. They told me I need to sell or refi with a different bank, so I went to one of those online sites and got bombarded with emails and phone calls from a half dozen different lenders. They made it sound like a decent deal where I could consolidate the junior loan with my mortgage, give me a ton of cash to do the work I wanted to do, yes the rate was higher but was they said I could do another refi in a few months when/if rates come down.
It didn't sound to enticing so I came here to ask the question.
I can pay off the car loan, student loan, and the personal loan probably within 2 years which would save me about $800 a month. This is a way better option than increasing my mortgage to save $400 a month (not to mention extended these loans out 30 years).
