A Quick Question: Should I Refi?

This comment was left on a post I did a while back about how you don't really skip two payments when you're refinancing since mortgage interest is accruing.  I thought this comment was worthy of a post of it's own.

Hi Rhonda!
I found your website on a Google search and I have a quick question for you. I need some advice. Here are the specifics.

Current MTG Loan balance is $161,927.28 with 28.5 years left at 5.5%
My TOTAL payment a month including taxes, etc. is $1278.

Proposed FHA Streamline Refi is for $167,779 for 25 years @ 5.0%
My TOTAL payment a month including taxes, etc. would be around $1290.

Out of pocket Expense $0.


We plan on being there another 7-10 years.

If we do this, there is talkof the double Mtg skip, and a refund of MIP.

I know they aren't really skipping, nor the refund an actual refund, because the total loan amount is more than my current balance, kind of a wash. But there is still about a $1700 difference.

I could really use the $ to payoff a few things, even though I'm really rolling it into the new loan.

Is this really that bad of a deal?
Any advice or counsel is much appreciated!



First of all, it's great RC is weighing out the long term value before proceeding with the refinance.  Often, home owners may refinance blinded by what seems to be an attractive rate or payment without considering if they'll break even.  Other factors besides the cost or savings is the effort it takes to accommodate a refinance.  Even an "easy" transaction is going to require some work on the home owners part with providing documentation, completing forms and signing final loan documents (an FHA streamline does have reduced documentation).

I'm always a bit concerned when a loan originator sells "skip two payments"…this shouldn't be a sales point by anyone who considers themselves a "mortgage professional".   You can check out my original post to see why.

There is no monthly out of pocket savings with this scenario.  In fact the payment would increase by $12 per month.  I'm assuming the savings of $1700 has to do with the illusion of skipping mortgage payments.

RC states there is no out of pocket expense but I'm unsure if this means it's a "zero cost loan" or if the closing costs are rolled into the new loan.

There is no refund of the upfront MIP.  A portion is credited towards the new loan with an FHA Streamline refinance.

The principal mortgage balance will be increasing by about $5,852 however the term is being reduced by 3.5 years.  With regards to the 25 year term, I'm not finding any lenders that we work with (and we are an approved FHA/HUD lender) who offers a rate improvement with a 25 year amortized amortization over the 30 year.

It sounds like you're focusing on the potential $1700 savings and if this is what's important to you, I probably would not increase my mortgage payment by $12 a month even though it would be reducing the term. 

So there are my pros and cons to consider with this proposed transaction based on the information that you've provided, RC.   Without having all of your actual details, you need to take my advice with a grain of salt.

PS: I rarely ever really get a "quick question" that has a "quick answer". LOL 😉




  1. Hi Rhonda,

    Thanks for the post reply. I have since done more research as well. Basically, there really isn’t a savings of $1700. I was really looking at long term savings more than short term, i.e. sell in 7-10 years, give me more equity in the home, also pay less interest over the next 7-10 yrs as well.

    Secondly, the skipping over mortgage payments isn’t really skipping, as I read your prior posts, but it would definitely help in the cash flow arena for the next 2 months.

    I plan on rounding up my Mtg payment eitherway, paying a little extra, etc. The original loan amount was $165,343, and the houses est. value is about $180k.

    I greatly appreciate your reply with the info I gave. If you have any more to add, please do. But I have a pretty good idea what I want to do/should do.

    Thanks again!


  2. You break even (principal balance) early in year 6. By year 7, the refi has come out to about $2500 less on the principal balance. In the meantime, you’ve paid an extra $1000 on payments to achieve that, and gotten roughly $1000 less of a tax break. Yes, there’s a win, particularly if you’re staying longer than 7 years, but personally, I don’t think a net of $500 over the course of 7 years is worth the hassle of a refinance.

    5.5% is a good rate — unless things drop even further than they have, it doesn’t look like it would be worth it, to me.

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