Should I Refinance My Mortgage

by Mrs. Silva
(Somerville, Massachusetts USA)

Ask Kate: Should I Refinance My Mortgage - Dear Kate, Thank you so much for all the great information you have in your website. As many Americans now, my husband and I are in the process of refinancing our primary home.

Mrs. Silva continues... We paid $400,000 and the house is now worth around $480,000. We currently owe $458,000 in two mortgages and our monthly house payment is $3,500.

The 1st loan is at 5.625 percent and the 2nd mortgage at a very high rate of 8.75 percent. We applied for a FHA loan which requires the 2.25 percent mortgage insurance. Adding this and other refinancing costs to the new loan will increase our balance to $470,000.

We’re a looking for 30 year loan at 4.75 percent. If we continue paying the same $3,500 towards the new loan, it will be paid in 16 years, which is at least 6 years shorter comparing to the current loan in which we owe 22 years.

Having the housing market the way it is now with prices not increasing, do you believe it is a good idea to increase the loan balance now hoping to save in the long run?

Thanks again! Mrs. Silva Somerville, MA

Kate Answers: Should I Refinance My Mortgage

Ask Kate at
Dear Mrs. Silva, It is refreshing to see even with a 2nd mortgage, you do not owe more than your house is valued!

The trick now is whether these values will hold. No one knows. (If we had the power to predict, we could have avoided a lot of pain for homeowners in America.)

Safety Nets For Monthly House Payments

One thought I have on your refinance has little to do with real estate values. Based on your numbers, by refinancing, you are significantly lowering your monthly house payments. This offers a safety net in case $3500 mortgage payments become unaffordable.

On the other hand, if the monthly house payments are not a drag on your budget, you have secured a plan to pay off your house in 16 years.

More On Should I Refinance My Mortgage

I also think you will be helped by my answer to Catherine's question at How To Compare Mortgages - Unique Answers.

And this article of mine too, since most homeowners wonder Is Mortgage Refi Worth The Cost?

More About FHA Mortgage Loans

I have also included FHA help at the bottom of this page, for example my article, Despite Myths Surrounding FHA Refinance, Powerful Benefits Exist.

Mrs. Silva, one more thing. I'd like to hear back from you. Let me know if this page was helpful to you. Comment here on Should I Refinance My Mortgage.

Or Ask Kate another question here.

Best wishes,

Ask Kate

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