Mortgage refinance: Private Mortgage Insurance?

I currently have a 5.5% interest rate mortgage with BBT. I am currently not paying PMI (strange because I have only 5% paid into the house). If I refinance will I have to pay PMI and if so will it still save me money in the 'long-run".


6 Answers

  • Bob
    Lv 6
    8 years ago
    Favorite Answer

    You may have PMI and just not realize it. There have been low down payment programs available in which the lender pays for the PMI and builds the extra cost for it into your interest rate. It is also possible your original lender did your loan as a "portfolio" loan and was not subject to conforming FNMA or FHLMC loan guidelines.

    It is difficult to tell if refinancing will save you in the long run without knowing your loan balance and the current appraised value. PMI costs more for a loan of 95% of appraised value than it does for 90% or 85%. The cost is also affected by your credit score and the term of your loan. A link to a payment chart is posted below.

    For example, if you refinance a $200K loan to 30 yrs @ 4% your interest savings are about $180 per month. If your loan is 95% of appraised value you give back $107 of that savings in PMI. At 90% the PMI is only $82.

    Source(s): Licensed Loan Officer in Ohio
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  • In most cases, PMI is mandatory unless you have at least 20% equity in your home. If you bought in with less than that, you probably don't have a conventional loan. FHA loans do have a mortgage insurance premium (called MIP) but it is generally rolled into the principal of the loan so it is not as obvious as PMI is.

    You will need to get an appraisal and quotes from lenders to see if you will be able to avoid PMI or not. If you can't, the amount that you may have to pay for PMI may wipe out any savings that you might realize from refinancing for a lower interest rate.

    However if you do have an FHA loan, it may be possible to refinance with another FHA loan and get some real savings that way. Any unearned MIP is rolled into the new loan and that will reduce the MIP on the new loan. I've done that several times in past years and lowered my payments every time. I've done business with James B Nutter in the past and was very satisfied with their service and business practices. They do business in all 50 states and won't clobber you with junk fees, either for a purchase money mortgage or a re-fi. They specialize in FHA loans and if I were ever in the market again for an FHA loan, they would be my first stop for a quote.

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  • 8 years ago

    As refinancing means nothing but taking out yet another mortgage loan, you have to be careful so that you don’t make the mistake of taking out a wrong loan and bear it throughout the repayment term of the loan.

    Good luck.

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  • 8 years ago

    Most lenders will require you pay PMI under 80% LTV.

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  • Anonymous
    3 years ago

    I would like to ask the same question as the op.

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  • 3 years ago

    Well, it depends..

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