Are there any downsides to refinancing with no closing costs if the interest rate only drops by 0.1%, but it lowers the monthly payment by about $800-$900 because PMI is removed and the home value has gone up? I’d like to hear your thoughts.
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Make sure they don’t significantly lower your escrow. I had a company do that to me recently, and it really irritated me.
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Eliminate the PMI; it’s just money down the drain each month. You’ll probably have the opportunity to refinance again in a few months and potentially reduce your rate and payment even further.
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There is no downside if the lender credit covers all loan costs. However, if they are including additional costs, then there would be a downside.
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The math here doesn’t add up. It’s not possible to have $800-$900 in PMI; that amount simply doesn’t exist.
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Reworded. PMI + increase in home value.
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You still won’t be able to make progress with just a 0.1% rate drop and PMI removal. The value of the home doesn’t matter if it’s worth a fortune; it’s based on the amount you currently owe.
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I’ll go over the loan estimate to confirm that I have the figures correct.
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How could you possibly have such a high PMI? Your loan amount must be one where a down payment of less than 20% is not permitted.
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Reworded. I meant increase in home value + PMI removal.
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Wow, that’s a significant reduction for just 0.1% plus PMI. If the lender is covering all the costs, it seems like a fantastic deal. However, be sure to consider how much additional time you’re adding to your mortgage. For example, if you’re 10 years into a 30-year mortgage and are starting a new 30-year term, you’re essentially going backward. Weigh this against the monthly cash flow savings to determine if it’s worth it.
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Thank you. Less than two years into the mortgage.
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Your math seems off. If you have enough equity to eliminate PMI, you don’t need to refinance. Instead, request that your lender remove the PMI and retain the progress you’ve made over the past two years, rather than starting over.
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I’m not sure if I’m overlooking something. My current monthly payment is $4,500, but with the rates they’ve provided, my new payment would be $3,600 plus taxes. I don’t understand why there’s such a significant difference.
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You need to perform a side-by-side comparison of the current Principal & Interest (P&I) versus the new P&I payment. Taxes and insurance should remain the same (please double-check). Also, find out how much the Private Mortgage Insurance (PMI) was.
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How much is the new loan amount and how much do you currently owe?