FHA Streamline Refinance Questions
by William Golden from Austin, TX, USA
Hi Kate, I talked over my FHA streamline refinance questions with my current mortgage lender. I owe $158,000 on my 30 year fixed rate mortgage at 6.75 percent. My monthly house payments are just under $1500 a month with property taxes and insurances included.
I am not looking for cash out, just for a lower interest rate. We are not hurting financially, just thought we could save more.
Our current lender quoted us an FHA streamline refinance for 30 years at 4.875 percent but the closing costs are $8,200. This would bring our monthly payments down to just under $1300 a month.
We have built up about $12,000 in equity thus far so it's hard to see $8,200 rolling over into the new mortgage and losing that equity.
We are looking to stay in our current house for another 3 to 5 years. By that time, we will probably have another baby and will have outgrown our house. So will be important to us to have equity that we can take out of our current house to put it into our next house.
I have 2 questions really about this FHA streamline refinance consideration...
1-- Is refinancing a good move considering our situation?
2-- I talked to the lending company on the phone and was asked to lock in the rate, which I agreed to, and then he took my info over the phone for the application. They are sending the application to me to sign.
I have not signed anything. If I decide to back out, would you foresee that being a problem? If I was even able to back out, could that potentially hurt my credit score?
Thank you so much for all your help! William
Kate's answer: FHA Streamline Refinance Questions
Hi William, I have been asked this many times over the years and here is what I have told homeowners contemplating a refinance.
FHA Streamline Refinance Calculations
Divide $8200, the cost of the refinance, by the estimated monthly savings of $200. According to my calculations, it would take about 41 months for you to recoup the cost.
Bottom line? You have to decide if the cost of the FHA streamline refinance is worth the savings. Is 41 months a reasonable amount of time to pay yourself back? Only you know.
Mortgage Rate Lock
Since mortgage companies have varied mortgage rate lock agreements, you will need to consult their paperwork to understand your rights and obligations. Remember to get all terms of the mortgage rate lock in writing.
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