Indianapolis area Primary Residence re-finance - opinions

[Rodney Kuhl]

I was using a great lender for a couple of new rental purchases. I used him for my first rental as well and he is great. I figured I'd ask him about re-financing my personal residence while I was at it with the rates as low as they are now and to see if we could get out of paying PMI. We bought the house last year for $182k and put 5% down. We pay a bit more than our payment every month so our balance is just under $170k. I spoke with 3 realtors and got estimates between $185k and $195k for the value of our house.

The appraisal came back today at $185k. Which means our rate would jump an additional .25%, or we can pay down to 90% LTV. The latter option would cost about $2k out of pocket. The re-finance would actually increase our monthly payment by about $20, but we would not be paying any PMI so it would be a better tax write off. We paid $400 for the appraisal and if we close on the re-fi we get a credit back for the appraisal so we would pay nothing out of pocket (unless we chose to pay down to 90%). If we leave it, our payment stays the same but we are out $400.

I see my options as this:

1) Don't close on the re-fi, keep our payment the same, but accept losing $400.

2) Close on the re-fi, accept the higher payment of $20/mo, and look to re-fi again in a year.

3) Close on the re-fi and pay down to 90% LTV. However, that is $2k out of pocket that we then don't have to purchase another rental property.


What would you do?