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With your FHA streamline refinance, did your PMI go up? Well, from my experience with streamlined refinancing, I can say, there may be several reasons behind this. The PMI premium that you pay is majorly dependent on several variables in the finance market. However, before that, it is important to consider how FHA streamlined refinance works.
The Federal Housing Administration (FHA) Streamline Refinance is considered one of the easiest ways for a homeowner to have the most lucrative mortgage rates as well as reduce the monthly payments significantly.
Why Did My PMI Go Up On My FHA Streamline Refinance?
The catch of FHA streamline refinance is that it allows the existing FHA homeowners to easily refinance their home loan with only minimum documentation and underwriting required. No appraisal is required to refinance your loan into FHA streamline and that is a major catch for underwater homeowners.
What more, being an existing FHA homeowner, when I applied for Streamline Refinance, they executed it quickly without any credit or income verifications. It relieved me a lot because I was in dire need for money and the equity accumulated on my home paid me well.
Do you know it does not have any concept such as cash back? So, if you are thinking that you can have a lump-sum amount of money by refinancing the original home loan to FHA Streamlined Refinance, it’s not like that. It works in the way of lowering your monthly interest payments significantly, thus, reducing your monthly expenses.
At the end of the month, you can have a little extra money in your hand, which you can utilize for something good and prospective, as I did. My home needed major renovation, and Streamline Refinance helped me out significantly.
FHA Refinancing and Insurance Coverage
However, when you choose to have FHA refinance loan, the upfront mortgage insurance will increase than the current, which might be one reason for your PMI to go up. That happened to me as well; in fact, PMI goes up initially when you refinance your current home loan to Streamline Refinance. But the major draw is that it won’t remain forever.
The principle interest drops majorly with FHA Streamline Refinance, which reduces your monthly payments, saving you some money in hand. The PMI will keep falling and eventually, will fade out in the long term, i.e. for more than 3 years.
If you are actually planning to save some money with Streamline Refinance and stay in your home for than 3 years, you will find your Mortgage Interest eventually disappearing when you reach 78% LTV. You will also find the same adjusting down each year based on the amount of loan. At a point of time, when you will reach 78%, you will find yourself saving almost 440 per month!!
The PMI automatically boils down to nil, provided you are considering for the long term. With my experience, I can say, long term makes sense with FHA Streamline Refinance; short term doesn’t. So, if you are thinking of short term and trying to cut down on PMI, it won’t happen.
I do it all day long, and I can assure you, PMI won’t be there forever. Nothing will add to the balance of your refinance loan, with no appraisal required, no cost to you. Think long, save big!!