Yeah, I think I'm gonna have to go for it. As clawhammer mentioned, the rates are too good to pass up and I don't think I'm gonna get this kind of 'earnings' if I invested the same amount of money to "pay-down" my existing principal in stock market.

 

They will let you out of the PMI as soon as you can prove you are at the 80%. So if a few months went by and you miraculously had a jump in value and could prove it with a new appraisal (or sometimes property tax appraisal) then you can request they stop enforcing PMI. In our case, as soon as we can get a tax return and get rid of the home equity loan, we would be safely with the 80% threshhold and could discontinue PMI. My lender want PMI, and the ones that don't generally give you a tad higher rate than the lowest in the market.

My credit union requires it, but has rock bottom rates and closing costs at $1,500 on a $200k+ loan for the whole deal. Nothing hidden, its a reliable credit union I have been with a long time. So I would probably just pay PMI for 5 to 6 months and do it IF the rate ticked down to where it was and if I don't snag a nice job across town in the next couple weeks.

 

Yes, no PMI loans are really self insured PMI loans which come at a premium in cost. There is no such thing as a free lunch.

FHA requires the MIP (same thing as PMI) to last for at least 5 years, whereas Conventional loans just require it down to 80& LTV. You can either pay it down to 80% of the original loan or prove your value has increased.

And closing costs can't vary significantly between lenders regardless of whether they are a bank, CU, or mortgage company. A swing of $200 is considered big nowadays and isn't due to going to Lender A or Lender B, it's due to the actual costs in your area.

For instance an appraisal in one area might run $425 but be $495 in another.

The laws and rules have changed significantly in the past 3 years. Several of them have resulting in a much smaller variance in costs between lenders but have also resulted in much higher closing costs than a few years ago.

 

^ ^ ^
Regarding the closing cost, what I find intriguing is that it can be much higher at certain rate, but for the next best rate, it can be much less, even zero. For instance, for 80% LTV and 3.875 interest rate, the closing cost can be $2450 ($1600 of which will be paid for by the loan officer, I pay the rest), while for the same LTV and 4.000 interest rate, the closing cost is zero. But the monthly savings I get for the two options are pretty much identical. Am I missing something here?

One more thing that just occurred to me is this: because I will be paying lower interest after the refi, I will get LESS tax benefit on mortgage interest I paid when I file my tax. This means the benefit of the refinance is *somewhat* offset by the less tax benefit. I doubt this is big enough for me not to go forward with the refi, but I don't really have a clue as to how big this is ATM. Maybe one third of total interest you pay a year??

 

It depends upon your loan size. The PREMIUM (that's what the lender gets to pay your closing costs) isn't enough to pay your closing costs with only a .125% increase in interest rate unless you have a very large loan so something is missing from you scenario. It usually needs .25-.375% to cover those costs to that degree.

Closing costs are mostly fixed fees. There are only a couple of pecentage cost fees so the closing costs on a $40,000 loan are very similar to the closing costs on a $400,000 loan. This means that on smaller loans it's tougher to recoup your closing costs and therefore it's tougher to justify a refi.

On Jumbo loans I have a customer who has refi'd every 18 months or so for years and he's still coming out ahead. He gets to skip 2 payments and gets a refund of his escrow account while rolling a new escrow account into the new loan - hence it is not a cash out transaction, While inflation has slowed in our area, it's never stopped. You could never do this with a regular sized loan.