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Is it advisable to refinance in order to get rid of PMI insurance fee?

My bank wants me to refinance to get out of FHA and remove PMI. My rate will go higher but my payment will be less. Is this a good idea? Will it cause any issues with my tax deduction? by jimmy.sandoval457 from Mission Viejo, California. Apr 17th 2014 Reply


William J Acres (William_Acres)
#1 ranked lender in Arizona - 8,553 contributions

Some lenders will say yes, and others will say no.. the real answer depends on your exact scenario (which you did not provide).. FHA changed the rules for MI last year, and new FHA loans will pay MI for the life of the loan.. If your FHA loan was initiated prior to June 2009, then FHA has a reduced MI rate available.. (.55%) so because of the difference in MI rate factors, and interest rate factors between conventional and FHA, it's possible your payment could actually be lower going back to FHA.. Also understand that your "Re-casting" your balance out for another 30 years, so even if the rate were the same, your payment would go down.. it's best you get a Good Faith Estimate and Fee's worksheet from your current lender and compare shop with a local mortgage broker.. have them put together both conventional and FHA scenarios for proper comparison.. once you have several examples to compare to, only then can you make the best decision.. I'm a Broker here in Scottsdale AZ and I only lend in Arizona. If you or someone you know is looking for financing options, feel free to contact me or pass along my information. William J. Acres, Lender411's number ONE lender in Arizona. 480-287-5714 WilliamAcres.com

Apr 17th 2014
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Chris Gummerson (cgummerson11)
#396 ranked lender in California - 648 contributions

If you are planning on staying in the home long enough to recoup the costs to refinance, and you are saving money, then it seems like a good idea. Tax questions should really only be handled by your tax adviser.

Apr 17th 2014
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Jason Vondrak (jvondrak)
#218 ranked lender in California - 1,741 contributions

Yes, it is a good idea to eliminate PMI. You can deduct the amount of interest you pay on your mortgage from your taxes as well.

Apr 17th 2014
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Kiyoshi Inui (Kiyoshi)
#538 ranked lender in California - 108 contributions

It depends on when you got in your FHA loan, and how much longer your PMI term has.

Apr 17th 2014
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Dr. Shab Kavandi (skavandi)
#471 ranked lender in California - 53 contributions

yes it is good idea even though your current rate is low but since you have a PMI payment your blended rate after considering your PMI is much higher than what you have on your note! Check the rates with other lenders to make sure you get the best possible rates in the current market! We are located in Aliso Viejo (in your neighborhood) and we do offer very competitive rates and excellent customer service you can check our every minutes updated rates in visiting our website:http://www.americanselectfunding.com/ ~~~~~ or call me directly at 714 639 6694 ~~~~ my very best ~~~~ Shab Kvandi

Apr 17th 2014
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Brad Yzermans (HomeLoanArtist.com)
#516 ranked lender in California - 10 contributions

Issues to consider: If you refinance, your loan may no longer be a non-recourse loan. Ask yourself what are the odds that will come into play it the future.Also, find out when your projected time is when the FHA MIP will be removed under normal amortization of the loan.And how much will the monthly payment go down? Is that enough benefit to justify starting the whole amortization period all over again and your loan balance going higher after rolling all the costs into the loan?

Apr 17th 2014
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Joe Metzler (JoeMetzler)
#2 ranked lender in Minnesota - 3,852 contributions

Talk to another lender besides your bank. It may make a lot of sense to refinance - it might not. For example, let's assume you'll pay $5000 in closing costs and go back to a new 30-year loan, when your PMI might automatically drop in two years - saving a lot more than the cost of a refinance.

Apr 17th 2014
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David Schwartz (davids)
#512 ranked lender in California - 24 contributions

No Probably not. But it is really a numbers questions. Without knowing when you got your loan, how many years you are into it, what your interest rate is, what your annual mortgage insurance factor is, and if you are able to request the removal of mortgage insurance after 5 years once you have reach 78%ltv, NO ONE is really able to answer your question. David SchwartzBanc Home Loans714-227-5087

Apr 17th 2014
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Dan Marchiando (dan@yourbestinterest.net)
#473 ranked lender in California - 29 contributions

Hi Jimmy,You will need to determine if the refinance is really in your best interest, based on what your goals are. Someone giving you advise needs to have more information than what you've given, to give specific advise. That said, it is possible that with your bank's refinance, that the payment is only lower because you are starting with a new 30-year amortization of your loan. It is possible then, that even though the payment is lower, you would in the end, end up paying more than your current loan. In other words, by "re-starting" your loan, you are stretching out the repayment of the loan over a new and longer repayment period than your current loan, and could potentially be increasing your cost in the end. If monthly payment is your primary concern, then it might be worth considering, but it shouldn't be the only thing you look at. Also, if you have an older FHA loan, it is possible that some day you could cancel the monthly mortgage insurance. You will need to research this issue. You also need to consider the future tax deductibility of mortgage insurance. Right now I'm pretty sure it is deductible, but it hasn't always been, and it may not be in the future. And the deductibility depends on whether you itemize as well. You really need someone to look at your whole scenario to give you good advise. If you need more help, you're welcome to contact me through my profile. Sincerely, Dan, a Calif. Mortgage Broker

Apr 17th 2014
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