Author Topic: Should I refinance?  (Read 1111 times)

mrigney

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Should I refinance?
« on: November 10, 2014, 09:28:11 PM »
Bought a house in May...30 year mortgage, 4.75% < 20% equity. Put less on the house so we could do a complete kitchen reno upon move in. Put about $10k into the kitchen to completely gut it and rebuild it. Appraised value of the house was $140k at purchase. Our loan amount was $131.75k. We chose to do lender paid PMI, so there is currently no PMI on the house (cost us about 0.25% on the interest rate).

Question is, should I refinance? Rates have dropped significantly since we bought (although they've come up just a bit over the last two weeks). Currently, my credit union is offering a 20 year fixed starting at 3.625%. Suspect I'd find similar rates around the area. Who knows if I'd qualify for the absolute lowest rate, so let's say I can get 3.75%. Should I refinance? Going from a 30-year @ 4.75% to a 20-year @3.75% would increase my P+I payment about $90/month. My fear is that I would end up having to pay PMI for a while, though, and that is a huge tax...is it worse than the high interest rate, though? Best guess from a realtor friend of mine is that the house would appraise now for somewhere in the $147-$152k range, so let's say $150k. A new 20-year loan for the original loan amount ($132k....I owe about $130k + would probably roll closing costs into the new loan) would leave me paying PMI for about 24-28 months. Not sure what the PMI would be, but a friend in the neighborhood w/a similar house and w/a similar loan-to-value ratio pays $60ish/month in PMI.

Thoughts?