Author Topic: Should we refinance to remove PMI?  (Read 3085 times)

sjc0816

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Should we refinance to remove PMI?
« on: July 14, 2017, 08:04:53 AM »
We currently have a 15 years, 2 months left on our 20 year loan at 3.75%. Payment with escrow is $2019.00 which includes $135 PMI payment. Mortgage balance is 193,000 on the home worth about $270,000.

Bank of America will not remove PMI without an appraisal (THEIR APPRAISER)...costing $600. I just received a quote from our local credit union for a 15 year fixed loan at 3.125% payment would be $1791.00...no PMI. Cost of refi would be around $1,300 plus reserves (we will get that back from our old escrow account).

I think the refi sounds good because the rate is lower, payment is lower...doesn't extend the term and gets us out from underneath Bank of America. Am I missing anything here? Does it sound like a good move?

researcher1

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Re: Should we refinance to remove PMI?
« Reply #1 on: July 14, 2017, 08:10:05 AM »
We currently have a 15 years, 2 months left on our 20 year loan at 3.75%. Payment with escrow is $2019.00 which includes $135 PMI payment. Mortgage balance is 193,000 on the home worth about $270,000.

Bank of America will not remove PMI without an appraisal (THEIR APPRAISER)...costing $600. I just received a quote from our local credit union for a 15 year fixed loan at 3.125% payment would be $1791.00...no PMI. Cost of refi would be around $1,300 plus reserves (we will get that back from our old escrow account).

I think the refi sounds good because the rate is lower, payment is lower...doesn't extend the term and gets us out from underneath Bank of America. Am I missing anything here? Does it sound like a good move?

No, you are not missing anything.  Yes, this sounds like a good move.

There is no reason NOT to do this.  You will make up the closing costs in just 9 months of eliminated PMI payments alone.

That being said, I would contact a few more lenders and see if you can find one with lower closing costs. 
In my state, I can get those rates with only ~$350 in closing costs.

sjc0816

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Re: Should we refinance to remove PMI?
« Reply #2 on: July 14, 2017, 08:11:47 AM »
I'll do some more research. Did you find those closing costs through an online lender? I'm not sure why but I'm hesitant to use an online lender and was hoping to go more local. Is that silly?

researcher1

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Re: Should we refinance to remove PMI?
« Reply #3 on: July 14, 2017, 08:18:37 AM »
I'll do some more research. Did you find those closing costs through an online lender? I'm not sure why but I'm hesitant to use an online lender and was hoping to go more local. Is that silly?

No, it is a traditional brick-and-mortar bank with locations in three states.
They have offered $250 closing costs on refi's for many years.  Once you add in recording fees and such, it is usually around $350.  This may not be available in your area, but it seems like you should be able to pay far less than $1300.

frugaliknowit

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Re: Should we refinance to remove PMI?
« Reply #4 on: July 14, 2017, 08:42:11 AM »
We currently have a 15 years, 2 months left on our 20 year loan at 3.75%. Payment with escrow is $2019.00 which includes $135 PMI payment. Mortgage balance is 193,000 on the home worth about $270,000.

Bank of America will not remove PMI without an appraisal (THEIR APPRAISER)...costing $600. I just received a quote from our local credit union for a 15 year fixed loan at 3.125% payment would be $1791.00...no PMI. Cost of refi would be around $1,300 plus reserves (we will get that back from our old escrow account).

I think the refi sounds good because the rate is lower, payment is lower...doesn't extend the term and gets us out from underneath Bank of America. Am I missing anything here? Does it sound like a good move?

No, you are not missing anything.  Yes, this sounds like a good move.

There is no reason NOT to do this.  You will make up the closing costs in just 9 months of eliminated PMI payments alone.

That being said, I would contact a few more lenders and see if you can find one with lower closing costs. 
In my state, I can get those rates with only ~$350 in closing costs.

+1
My "back of the envelope" estimate is about the same.

Cwadda

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Re: Should we refinance to remove PMI?
« Reply #5 on: July 14, 2017, 08:52:48 AM »
Move it to the credit union. Local banks are much easier to deal with. Even if it is a little bit more, the better customer service is worth it. Small, local banks are the best way to go.

tweezers

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Re: Should we refinance to remove PMI?
« Reply #6 on: July 14, 2017, 09:42:06 AM »
I would also look around, and shop the online rates.  With your home value and current balance, there are several online lenders in my area at or slightly below 3% APR (e.g. AimLoan.com at 2.875% for 15 year mortgage).  We have refinanced 4 times (2 homes) and always found a far better rate online than at our local lenders, and never had issues with closing, payments, etc.  I disagree with the poster above who said that a higher rate with a local lender is worth it.  I give zero thought to my mortgage, which autpoays every month, and there's no reason to pay more to have a building nearby.

Another Reader

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Re: Should we refinance to remove PMI?
« Reply #7 on: July 14, 2017, 11:26:25 AM »
Move it to the credit union. Local banks are much easier to deal with. Even if it is a little bit more, the better customer service is worth it. Small, local banks are the best way to go.

Totally disagree with this.  Local credit unions are bad at originating.  They are not great at servicing either.  Almost all conventional loans are sold to Fannie/Freddie anyway.  If your file is easy to underwrite, go with Aimloan or someone like that.  Try some other brokers for comparison.

Avoid Quicken and its offshoots - they are overpriced.  Don't use an aggregator like Lending Tree.  They sell your information and you do not get the best rates and terms through the aggregators.

Cwadda

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Re: Should we refinance to remove PMI?
« Reply #8 on: July 14, 2017, 11:36:17 AM »
Move it to the credit union. Local banks are much easier to deal with. Even if it is a little bit more, the better customer service is worth it. Small, local banks are the best way to go.

Totally disagree with this.  Local credit unions are bad at originating.  They are not great at servicing either.  Almost all conventional loans are sold to Fannie/Freddie anyway.  If your file is easy to underwrite, go with Aimloan or someone like that.  Try some other brokers for comparison.

Avoid Quicken and its offshoots - they are overpriced.  Don't use an aggregator like Lending Tree.  They sell your information and you do not get the best rates and terms through the aggregators.

How do you know OP's local credit unions are bad? Are you in the same location?

Another Reader

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Re: Should we refinance to remove PMI?
« Reply #9 on: July 14, 2017, 11:44:11 AM »
Never met a loan officer at any credit union that knew a lot about what they were doing.  They tend to be new at the job or unsuccessful at other institutions.  I have done a lot of loans (probably nearing 40)  with banks and brokers, could never find a CU with the lowest rate and a loan officer that could underwrite the file.  Some banks are better, brokers are variable with some really good ones out there.  Very few institutions keep conventional paper.  Almost all is sold to Fannie or Freddie.


Cwadda

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Re: Should we refinance to remove PMI?
« Reply #10 on: July 14, 2017, 11:49:23 AM »
Never met a loan officer at any credit union that knew a lot about what they were doing.  They tend to be new at the job or unsuccessful at other institutions.  I have done a lot of loans (probably nearing 40)  with banks and brokers, could never find a CU with the lowest rate and a loan officer that could underwrite the file.  Some banks are better, brokers are variable with some really good ones out there.  Very few institutions keep conventional paper.  Almost all is sold to Fannie or Freddie.

Anecdotal evidence as a blanket statement for all local credit unions? I don't get it.

My advice for the OP is to interview several different banks, definitely include the credit unions.

Lanthiriel

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Re: Should we refinance to remove PMI?
« Reply #11 on: July 14, 2017, 11:58:53 AM »
When we were shopping around for mortgages, we found that the credit unions were higher both in interest rates offered, basically refused to give us input on the type of loan we should pursue, and had high closing costs. We dealt with a couple of mortgage brokers who were offering the same rate and went with the guy who was more responsive even though he was a few hundred higher in closing costs.

sjc0816

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Re: Should we refinance to remove PMI?
« Reply #12 on: July 23, 2017, 03:59:09 PM »
I shopped around and found what appears to be the lowest closing costs (still not as low as some have mentioned on this thread). I know we need to pull the trigger on this since I just checked my mortgage documents and our PMI doesn't fall off until August of 2019.

Does any of this look out of line for closing costs?

Appraisal $515
Title Exam $305
Settlement/Closing fee $600
Title Search $285

Other random smaller fees: $215

Total:  $1920 minus a $575 lender credit of $575 = $1345

Prepaids are:

Interest: $260
Property Taxes paid at closing $2196

Total: $2456

Initial Escrow Payments:

Insurance: $125/month for 7 months = $875
Taxes: $360/month for 2 months = $$732

Total: $1607

Total due at closing: $5408


This up front money is making it hard for me to pull the trigger. Because we have a tax payment due in September, they have to collect that ENTIRE amount up front in addition to the escrow reserves. Our current escrow balance is about $2600....so I know that would be refunded to us, but it's not as much as they are collecting up front.

Like I said, I know we need to probably do this...but part of me is wondering if we should wait until September to close? Avoid that massive up-front cash to close?  Or just bite the bullet and do it now? This is for a 15 year fixed rate of 3.19%.




Dicey

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Re: Should we refinance to remove PMI?
« Reply #13 on: July 23, 2017, 05:35:45 PM »
I wouldn't advise this per se, but a lot of lenders will let you roll those fees into the loan. Just sayin'.

Did you try Aimloan?

I must also say, trying to shop a mortgage with multiple lenders was a godawful experience.

Finally, I have never found AR's advice to be anything but spot-on.

Another Reader

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Re: Should we refinance to remove PMI?
« Reply #14 on: July 23, 2017, 05:39:51 PM »
Not much difference paying the September tax payment at closing in August or when due in September.  In your shoes, I would shop the loan and go with the best offer.

sjc0816

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Re: Should we refinance to remove PMI?
« Reply #15 on: July 23, 2017, 06:16:09 PM »
Not much difference paying the September tax payment at closing in August or when due in September.  In your shoes, I would shop the loan and go with the best offer.

Correct. Except the tax payment is sitting in my current escrow account versus coming out of our savings.

Another Reader

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Re: Should we refinance to remove PMI?
« Reply #16 on: July 23, 2017, 06:46:08 PM »
If it's in a regular savings or checking account, I would bite the bullet and do it.  If it's in tax deferred accounts, can you borrow the money from someone for a month?  You don't want to take the risk of a 0% credit card loan, unless you can do it a couple of days before the loan closes and it won't make your credit report before the close, but it's one way of handling the cash flow issue.

sjc0816

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Re: Should we refinance to remove PMI?
« Reply #17 on: July 23, 2017, 07:18:33 PM »
We have the cash. I just don't like to part with it!

Another Reader

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Re: Should we refinance to remove PMI?
« Reply #18 on: July 23, 2017, 07:20:20 PM »
You are loaning it to yourself until the escrow refund check arrives.  That's within 30 days after you close.

Duke03

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Re: Should we refinance to remove PMI?
« Reply #19 on: July 24, 2017, 10:56:13 AM »
What not just escrow yourself?  I'll never escrow again.  Did it one time and no thank you.  Also if you could swing it my credit union will do a refi for 11 years at 2.875% with closing cost under $700.  If you have that much equity they won't even require an appraisal.  It's a quick easy loan as they are a hard money lender and don't even require use of a title place.  You just sign 3 papers like a car loan it's so easy I've done it 3 times now on different properties.  PM me if you want their info.  Doesn't matter what state you are in as they will over night you the paperwork.