I mentioned my plans to re-fi in order to rid myself of dreaded FHA MIP in another thread, but I now have actual numbers to throw out. I will be refinancing from a 3.75% FHA rate to either a 4.25% or 4.50% conventional loan with no PMI. The details are included below:

Principal on Loan Remaining: $278,000

Current payment (including $270 MIP/month): $2,033

Option 1:

Loan Amount: $283,000 (incl. closing costs and new escrow)

Interest Rate: 4.25%

Monthly Payment: $1,742

Closing Costs: $2,800 ($395 refunded at closing)

Option 2:

Loan Amount: $280,000 (no closing costs, only escrow funding)

Interest Rate: 4.50%

Month Payment: $1,772

Closing Costs: $395 (all refunded at closing)

There are multiple other options that were presented, but they mainly include paying points to knock off an eighth or a quarter of a percent and that just isn't worth it to me.

This will be my first refinance so I want to make sure I'm not missing anything, but there is no reason not to take a higher rate here in order to eliminate the MIP, right? If you include the MIP, my effective interest rate is well above 4.25% or 4.50%.

My only other decision would be to take the $30/month hit to knock off all closing costs or pay the closing costs to get a slightly lower payment. Ignoring discounted rates and future dollar values, it would take over seven years to recoup the closing costs at $30/month and I do not foresee still being in the house at that point. Even if we are, factoring discount rates and inflation, saving the money now still seems like the best option.

Any advice is appreciated!!