Mortgage Rate Refinance No PMI

by Andy

Ask Kate: Mortgage Rate Refinance But No PMI What would you do? Lower your mortgage rate 1.5 percent to 4.6 percent and pay PMI or walk away from the refinance? Read the strategy of a homeowner who decides private mortgage insurance (PMI) is not an option. --Kate


Andy's Refinance And PMI Story

Hi Kate! I want to refinance early in the mortgage but I am not paying PMI! I bought my house in Sept 2007 with an interest rate of 6.275 percent and am looking at refinancing at 4.6 percent currently.

The problem is that I've had my mortgage for so short that hardly any of the principle is paid off. I did put 20 percent down but if I wrap up all the closing costs into the new loan it would put the amount of the mortgage over 80 percent value of the home, at the current assessed value.

It should be fun (not!) but I'm going to try to get the home appraised at a higher value so the balance of the existing loan plus the closing costs will be below 80 percent of the value of the home.

Otherwise, at this time it is not worth it to me to shell out the $4000 in closing costs to keep the new mortgage below 80 percent of the value to avoid private mortgage insurance.

I could lose my $350 in good faith deposit to my bank if I get to the appraisal stage, that far into the process. The gamble will be hard to pass up since over the life of the loan we're talking tens of thousands of dollars in savings!

Thanks for listening, Andy

Kate Answers: Mortgage Rate Refinance No PMI

Hi Andy, I applaud you for taking the time to think critically about a mortgage rate refinance and decide if it is the best move for you.

Lowering your mortgage rate 1.5 percent is tempting but I certainly understand why $4000 coming out of your pocket for closing costs just to avoid PMI may not be desirable.

Especially since you originally put down 20 percent!

Here is my home mortgage payment calculator. Use it to calculate different mortgage payments and see if there could be other ways to save money.

I hope you'll come back to Get-Your-Best-Mortgage-Rate again in the future. Let us all know how your appraisal strategy works out and if you ended up moving forward with the refinance.

Remember to bookmark Get Your Best Mortgage Rate to your favorites and visit often for up to date tips for buying a house and refinance advice. You can also invite friends to comment on this page or create a page of their own like you did.

Best Wishes,




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