Dear Dr. Don, I am confused about whether I should refinance. I have a 30-year, fixed-rate mortgage at 6.75 percent interest. My wife and I would like to move into a bigger home. We have three kids at home plus a mother-in-law.The problem is we owe $294,000 on our home while newer, bigger homes are selling for the mid-$300s. When inquiring about a refinancing, I was quoted a 4.85 (percent) interest rate. That would only save us about $175 a month because we would have to have private mortgage insurance on the new loan. Plus, I would be paying about $10,000 in closing costs with all the fees. What should I do? -- Jon JunctureDear Jon, You have conflicting goals. If you want to move into a bigger house, then you don't want to refinance your current home. Why take on the cost and expense of refinancing only to move and lose all those sunk costs?If you decide to stay in your current house and refinance, keep in mind that private mortgage insurance isn't forever. The policy is canceled when your mortgage reaches an established loan-to-value. The Bankrate feature "9 steps to cancel PMI" will help you with strategies to later remove the PMI policy requirement from your new mortgage.The PMI premium reduces the initial savings, extending the payback period on the refinancing. However, you will have locked in a very attractive interest rate for the longer term. Refinancing with PMI in your situation will make sense only if you plan on being in the house for a while. Make the decision where you want to live first. The rest will follow. advertisementRelated Links:See home values in your stateNew appraisal may save second-home dreamMortgage rates climb for third weekRelated Articles:Should you refinance?Do you still need PMI?Loan-to-value ratio key to escaping PMI
Dear Dr. Don, I am confused about whether I should refinance. I have a 30-year, fixed-rate mortgage at 6.75 percent interest. My wife and I would like to move into a bigger home. We have three kids at home plus a mother-in-law.
The problem is we owe $294,000 on our home while newer, bigger homes are selling for the mid-$300s. When inquiring about a refinancing, I was quoted a 4.85 (percent) interest rate. That would only save us about $175 a month because we would have to have private mortgage insurance on the new loan. Plus, I would be paying about $10,000 in closing costs with all the fees. What should I do? -- Jon Juncture
Dear Jon, You have conflicting goals. If you want to move into a bigger house, then you don't want to refinance your current home. Why take on the cost and expense of refinancing only to move and lose all those sunk costs?
If you decide to stay in your current house and refinance, keep in mind that private mortgage insurance isn't forever. The policy is canceled when your mortgage reaches an established loan-to-value. The Bankrate feature "9 steps to cancel PMI" will help you with strategies to later remove the PMI policy requirement from your new mortgage.
The PMI premium reduces the initial savings, extending the payback period on the refinancing. However, you will have locked in a very attractive interest rate for the longer term. Refinancing with PMI in your situation will make sense only if you plan on being in the house for a while. Make the decision where you want to live first. The rest will follow.
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