Your currently not profitably on the property, dropping $25k to become marginally profitable may not be worth it. You should also be comparing both options to the option of selling the house and getting out from underneath it. The $25K is sitting right now in my savings/checking acct only earning a pathetic 0.9% interest rate. I guess my question is, is it worth it to spend 25K to save $400-500/month? If I refinance, my new mortgage payment with HOA included would be around $1200/month so thats a savings of almost $400-500/month. Rental income is only a little over $1300/month (and thats with top of the maket rate, I increase it 2% every yr). HOA dues are another $360/month for a total housing cost of $1692/month. Mortgage is $1332/month as it is now with PMI and PITI. I am laying more than $350/month now because my rental income doesnt cover my entire expenses. ![]() As long as your rent covers all expenses and you're making a profit it's fine. Since it's a rental I would let it ride as is. With inflation the PMI today will be peanuts compared to PMI in 10-30 years from today. At 10 years timeline you're "breaking even" with the "today" money you spent. I rather pay later if your sale scenario comes up. As much as I personally hate to pay PMI too, I would hold on to my cash in this instance. Since you said it may be a possible 5 year plan now you're money ahead by keeping your 25k in your pocket and keeping PMI and deducting the payment each month. What to do? Is it worth it? I hate paying PMI! Option (1) also requires closing costs of about $5K but if I choose to refinance, my total mortgage payment would drop by $124/month (not including the PMI of $ 95) so total savings is $ 219/month. However, I dont have a crystal ball and if an emergency happens, I want to be in a position where I could sell the apartment and not have to kick in extra money at closing (right now, if I sold it, I'd have to pay at lesat $5-7K for RE broker's fee). I have no plans to sell property at this time and would like to hold onto it for at least another 5 years because my current tenant loves the place. If I get my rate down to 4.125%, I'd have to pay $1,200 at closing for the discount point fee. If I refinance, the lowest rate I qualify for is 3.99% but I'd have to pay $1,900 for the point reduction. If I pay $25K now, I am OUT that money and could technically still be stuck w the PMI anyway. There is no guarantee the bank would agree to 80% or even 78%. (my loan was last refinanced in 2011 so under the 5 yr rule). I'd have to pay it down to reach 75% LTV and hope the bank wants to remove PMI. Option (2) : Do nothing and just pay down $25K outright to remove PMI on current loan. Option (1) : is to go ahead and refinance to lower rate to 4.33% (no points) and kick in $25K at closing to get loan balance down to 80% LTV, or I reached out to several lenders (including my current lender) who rejected my app said I didnt have equity except for 1 lender who told me they could work with me.īased on what I was told, here are my options: My current rate is at 4.75% on a 30 yr fixed and I believe my LTV is at 92% or so (i am waiting for the appraiser's report). I would like to remove my 95%/month PMI payment and lower my overall mortgage payment. If you sell your home in the next 1 to 1.5 years, refinancing probably wouldn’t be the best option.Given the feds have stayed the course on interest rates, I thought I would see if I could refinance my investment property before rates increased. As a basic example, if you pay $4,000 in closing fees to refinance and save $200 a month on your mortgage, it will take you 20 months to break even. ![]() Keep in mind that refinancing comes with closing costs that will need to be paid at closing or rolled into the loan. Your credit score may allow you to qualify for a conventional loan, but if it’s on the lower end, you may pay more in PMI and potentially have a bit higher interest rate.” “But on a conventional loan, the lower your credit score, the higher your monthly PMI premium. “With an FHA loan, mortgage insurance is a flat rate,” explains Leonard. So, if you’ve been working to improve your credit score over the years, you may now be able to qualify for a conventional mortgage and potentially secure a lower interest rate.īut, if you don’t have 20 percent equity and will be paying PMI, keep in mind that your credit score is a factor in determining that amount. Borrowers with scores of 740 or higher tend to get the most attractive conventional loan rates. To qualify for a conventional loan, you’ll typically need a credit score of at least 620.
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