Refinancing primary residence

[David Honeycutt]

Hey guys, my girlfriend and I purchased our home almost a year and a half ago we went with FHA loan so we have very little equity in the house. About a week ago we received a letter in the mail from Sun West Mortgage saying we could refinance. So we called them and gave them our information and said they could lower our interest rate and reduce our PMI. So I'm just wondering what I should look for if we do refinance with them. My girlfriend found some bad reviews about the company online saying there were hidden fees. Any advice as far what to look for or what questions to ask would be much appreciated. Thanks

[Joe Splitrock]

@David Honeycutt that is a huge savings in PMI, probably due to your home value increasing. You should request a sample settlement statement and make sure it includes all costs. That will itemize out any expenses that are included in the loan. It will show your interest rate, payment and loan term. If you can get it at 28 years and save $116 per month with nothing out of pocket, it may not be a bad deal.

Since you are posting this on bigger pockets, I do have to ask is your goal to save money every month or get ahead financially? I challenge you to look beyond the payment and consider how fast you are paying off the loan along with total amount of money you are paying. For example if you reduced the term to 25 years, you could pay down principal faster and get rid of PMI sooner. You will get ahead in the long run.

You should calculate out the total payments on each option rather than just looking at the monthly payment. You mentioned the payment would go down $10 per month if you extended it 2 years. If you do the math, that saves you $3360 over the next 28 years. Then extending your payments 2 years will add 24 * monthly payment. Lets say your payment is $650 per month, that would calculate to paying an extra $15,600. 

Lots of ways to look at this. Just be smart and make sure the good deal is for you and not the bank.