With all the mortgage rates dropping, I’m considering refinancing my home loan. Do I have to put a 20% down payment again to avoid PMI even for a refinance? My concern is that if my montly payments get lower, but now I will have to pay PMI, it might be more feasible for me to just not refinance, since it nets out to the same, and I don’t plan on living at my current home for 3 more years.
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you will need pmi if you do not have 20% down.
for only 3 years the cost to refi is not worth the savings.
If you have 20% equity in your home (meaning the amount you will need at refinance is less than 80% of your home’s value) you will not need to pay PMI. So, it really comes down to your house’s appraised value. If it is appraised at $200,000, the most you can borrow without PMI is 80% of that, or $160,000.
One thing to consider, though, if you plan to move out within 3 years is that it might cost you more to do the refinancing than you will save. A typical refi closing costs about 4% of the house’s value. If you only save 1% interest rate, you will not be there long enough to recoup the cost of refinancing. Typically you need at least 5 years to recoup refinancing costs.
If you are considering this, ask your bank if they will do a streamlined refinance for less costs. If they say no, then you have to do the tradeoff of how much you will save per month vs the cost to get a new loan.
It depends upon the current appraised value of your home.
If your refinance is for less than 80% of the current appraisal you probably will not need to pay PMI or to put any $$ up to avoid PMI.
As for the advisability of refinancing if you are only going to live there for 3 years.. take into account the costs involved in refinancing.
if you already have no pmi then you in most cases still wont. Now refinancing the home knowing that you will not stay 3 years may be a stupid idea as you probably will not recover the actual cost of this transaction in 3 years unless you are able to drop more than 4% from your current rate. There is no free loan. There is cost that must be paid or they are placed back into the loan plain and simple,
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