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Learning, Sharing, and Teaching => Ask a Mustachian => Topic started by: Broadway2019 on January 19, 2018, 03:43:36 PM

Title: Should I refinance?
Post by: Broadway2019 on January 19, 2018, 03:43:36 PM
Ok so I finally received my appraisal back and can refinance to drop PMI. I currently have an escrow shortage of $3,000 due to an increase in property taxes. Should I refinance?

Current Situation: 20 Year Fixed Rate (19 to go) Interest rate: 3.50%
Monthly payment: $2,869.39 (broken down as $2,041.54 principal and interest + $320.43 property taxes + $51.17 hazard insurance+$252.45 shortage in escrow account)
I think the shortage amount will go away once we are caught up though in escrow. So really it's $2616.

Option : 20 Year Fixed Rate Interest rate: 3.750%
Monthly payment: $2,411.14 (broken down as $2,039.54 principal and interest + $320.43 property taxes + $51.17 hazard insurance)

This includes some of the shortage being rolled into the loan and $1600 out of pocket. They can close on this within 1 week.
Title: Re: Should I refinance?
Post by: Tuskalusa on January 19, 2018, 03:54:13 PM
How much are you saving due to dropped PMI?
Title: Re: Should I refinance?
Post by: Broadway2019 on January 19, 2018, 04:01:21 PM
My PMI is $193 a month for about the next 4 years
Title: Re: Should I refinance?
Post by: Tuskalusa on January 19, 2018, 06:50:23 PM
It looks like you will save about $400 in cash flow on an ongoing basis.  (It will save a little more in the short term, given the escrow shortage.) If that increased cash flow can be put to good use, or it it takes you from negative monthly cash flow to positive cash flow, then it seems like a reasonable move.

While you are changing your finances around, this might be a good time to look at all your spending to make sure youíre running efficiently. Ideally, that $400 monthly upside would go to savings or investments.  That upside comes at a cost of higher interest for the life of the loan, so itís important to maximize the benefits of this decision.