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Had an FHA loan for about 3 years.  Its a 30 year 4.25% and I'm being told I can do a streamline refinance with a 3.5% rate and a savings of around $62/mo.  Not sure if its worth my time and what all the fine details are.
asked Jan 10 in FHA Loans by anonymous

1 Answer

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Good morning,

Whether an FHA streamline is a good deal or not depends on a couple of things -- like when you got your current FHA home loan. If you got your FHA loan before June 3, 2013, streamlining it would saddle you with mortgage insurance that never goes away, regardless of how much home equity you have. So that would be a dangerous move.

If you already have a mortgage with "forever" insurance, AND your home equity has not improved significantly, an FHA streamline could be a good deal. But watch out for lenders that define "savings" as the difference between your new payment and your old one. Because even if you took your current loan balance and refinanced it to a new loan at the exact same rate, your payment would drop because you'd be restarting the repayment on your loan  stretching out your balance from the 27 years remaining on your loan to a new 30-year term. Yet it's pretty obvious that no real savings is happening here. It can be deceiving.

Also, when you get an unsolicited offer in the mail or email, you don't really know who these people are. They may be legit, or they may be, as you wondered, a scam. Or they may be reducing your interest rate by adding a ton of fees to buy your rate down, which could increase your loan balance and cost you more money in the future.

If I were you, I'd first see how much equity I have in my home. Then I'd contact several lenders, which is easy to do with the link I'm giving you below, and ask them to provide "no-cost" offers for both FHA and conventional (non-government) refinances.

https://themortgagereports.com/ratequote

Compare the entire payment, including mortgage insurance, and choose the loan with the best bottom line. Finally, understand that re-starting your mortgage repayment can cost you more in the long run, even if you do get a lower rate -- but you can prevent that by following these guidelines.

https://themortgagereports.com/14993/mortgage-refinance-mortgage-rates-prepay-term

Good luck and thank you for writing.
answered Jan 10 by GinaPogol (22,130 points)

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