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Refinancing ripoff?

By Terry Savage on September 21, 2019 | Housing / Real Estate

I am 33 and purchased my first home September of 2018 for $173,000 FHA, interest rate 4.625% original loan amount is 169,866.00. Currently it’s 165,106.12. PMI is $117.41 a month. Total mortgage payment is $1,458.00. I would like to lower my monthly mortgage payment, main reason is because I was recently diagnosed with breast cancer and may miss a few days from work. I don’t plan on taking too much time off. At most a total of 4 weeks in February when I have my surgery. I haven’t mentioned that to the mortgage company I contacted about refinancing.

I was recently approved to refinance from FHA to a conventional loan for $170,000 for 3.875%. Also since I purchased my home in 2018 I finished my basement with a full bath a bedroom and a living room area. They are going to do an appraisal on it in the next couple days.

I wanted to ask your opinion on this….
Does this sound like a good deal?
Should I request a lender rebate?
Should I mention I have breast cancer and that is why I would like to lower my monthly mortgage payment?

I don’t plan on living in this home forever but I would like to sell it in like 2 years and not lose out.

Thank you in advance and I hope to hear back from you soon!

Terry Says

Whew, this is a tough time to make decisions.   First, let me offer you encouragement and support in your battle.  My daughter-in-law went through this a few years ago.  I hope you have friends/family to support you.  But you will win!  New therapies and treatments mean more women are not only surviving, but thriving.  You will be one of them.

As to your mortgage question, I think it’s a good idea to see if you can get rid of PMI and lower your monthly payment.  BUT something strikes me from the math in your question.  You say you currently have a mortgage balance of  $165,102.  That’s down about $4,000 from your original mortgage, which seems unlikely since you’ve had the mortgage less than a year and the first years’ payments are mostly interest!  Please double-check your current balance with your lender.

Second, and more important, you are getting a lower rate, but taking out a LARGER MORTGAGE amount — $170,000.   If your current balance is truly only about $165,000, that means you are paying $5,000 to buy down your loan to the current rate!  That is pretty expensive.

And third, you can get out of PMI when you have 20 percent equity in your home.  Has the home grown in value that much in just the past year?  Doubtful.  So this conventional mortgage is costing you about 2-3 years in mortgage premiums (which they are taking as a “fee” out of that larger mortgage amount)!!

I can understand your desire to have a lower monthly payment, but this doesn’t make financial sense over the long run.   Bottom line:  I suggest you check with other lenders — starting with online estimates from GuaranteedRate.com and QuickenLoans.com.   That will give you some basis for comparison.  It’s not just the monthly payments that matter — but the overall loan amount.

 

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