Should I refi brand new fha loan to HIGHER rate to lose pmi? (escrow, credit)

[Hlandin]

Just closed on a house using fha loan with 3.5% down, lender credited the fha mortgage origination fee.

Haven't even paid the first payment yet (other than closing interest) and am looking at a refi with navy fed using their homebuyer's choice to get rid of hideous pmi since the property is coming in at about 92% ltv, which was conservative. Had planned on using the usda rd for this property, but couldn't meet their new ratios.

current loan: 3.75% fixed 30-year with $246.69 pmi and tax escrow of $401

proposed: 4.5% fixed 30-year with no pmi and tax escrow of $312

This new loan would add about 12k to the loan total from closing costs, decreasing our equity but would save us about $262 a month, about what we pay in pmi.

The question -- trade a lower loan amount and low rate for a .75% rate increase and higher loan amount to save $262/month outlay?

The total we'd pay for pmi over 5 years is about 14, 500 (yowch).

Feel like we paid a fair price for the house, and the market is starting to slowly rebound in this area (sw MT) as it wasn't as hard hit as other large markets. I normally don't like to pay more in the long run for instant gratification, but we are trying to make a go of a new life in a new state after having to settle a 2nd in CA losing about $200k.

Also, less than thrilled about nfcu points and fees which are highway robbery but they are the only game with a 92 ltv right now.


Most posts I've seen discuss the pros and cons of refi to a lower rate -- this is opposite. The soonest we'd likely sell is 8 years, but probably will sit tight with the property much longer. Any feedback is appreciated.

[SmartMoney]

Your payback is 45 months or 4 years.

Have you looked around to see if you have any 80/10/10 loans in your area? That should cost you far less than 12K - and if you don't have the funds now (to pay down your loan to 90%), it could be there with a slight up-tick in equity, which you seem to think may be on the way.

Please check with all lenders how long you have to be in the property before refinancing. A 6 month requirement on title before refinancing is not uncommon.

[Hlandin]

Thanks for the idea, smart money. I'll sniff around to see if the 80/10/10 loan can work in this situation.

NFCU requires a 90-day seasoning. Just curious how you got the 45 month payback figure, as the figures I ran all came in much later.

[Debsi]

Why is the escrow payment almost $100 lower?

[Hlandin]

We did a boundary line adjustment to include an additional 40' of vacant land the seller owns, and the lender added $100 more to the escrow each month in anticipation of increased taxes. New escrow would take into account last year's tax amounts only. MT doesn't provided revised tax amounts after purchase until October of each year, regardless of purchase date.

[Debsi]

Originally Posted by Hlandin

We did a boundary line adjustment to include an additional 40' of vacant land the seller owns, and the lender added $100 more to the escrow each month in anticipation of increased taxes. New escrow would take into account last year's tax amounts only. MT doesn't provided revised tax amounts after purchase until October of each year, regardless of purchase date.

I see. Sounds like you will be ready for a payment increase next year when the taxes go up. Are Montana taxes paid in arrears?

[Hlandin]

Yes, they are. We are also appealing the current taxes, which are 1k (or more) than comparable houses in the area, so I don't anticipate too much of an increase, even if that doesn't fly.

On the 80/10/10, just curious how it provides a refi with less money down? By my calcs, 10% is quite a chunk, and I'm trying to avoid getting into a shell game of home financing. Been there, done that a few years back, and don't want to get caught in that web.