Refi to drop MIP (but possibly have higher interest rate) or not?

[Kat Hughes]

Hi! New to bigger pockets and would love some advice on refinancing or not...

We bought a $640K Multi Family home in 2012 (north hollywood, Ca) with a 3.5% interest rate, FHA loan.

We refinanced in 2015 and took out 100K which brought us to 709k with a 4.875% interest rate.

We're now at about 680k with a $4800 mortgage, $600 of which is our MIP which I guess we can't drop until 2027 unless we refinance with a conventional loan. M&T bank used the lock in MIP so we cant remove it even though our house has appreciated over 40% in the last few years.

Should we refinance again to take that MIP off but then possibly have an even higher interest rate OR, just wait till we finish paying that MIP? We would save roughly 3-500 per month by dropping the MIP, but then lose a few years of paying off the mortgage.

Thanks in advance for reading and maybe giving some advice! :)

[Chris Mason]

Originally posted by @Kat Hughes:

Thank you for the replies and helpful tips!  We are most likely going through the refinance and I guess my question is when?  We just updated one of our bathrooms and the garage (turned it into a room) and we have the option to remodel the kitchen and the 2nd bathroom.  Should we wait to refinance after the kitchen and 2nd bathroom have been remodeled, possibly giving us a better appraisal?  If so, how good of a value will the fixes give us?  Or we can just refi now and do the remodels after...

 If you have 20% equity either way, do it in between projects. You don't want the appraiser to show up when the kitchen has been gutted but not re-installed yet.

If you're worried about how much equity you have, wait until after the big non-cosmetic projects are done. You will likely not be getting dollar for dollar back what you put into it, but you will get something.