Mortgage Fact

So I am in the process of attempting to refinance our home. We purchased our home 18 months ago and over the last 18 months have been making extra payments of $50-200 each month so that we can get our loan balance down. The quicker the better right? WRONG! After talking to my lender/financial advisor (of which I have had the same one for 4 years) I found out that since mortgage rates vary and so do home values that it is better to put your extra money in savings, preferable a money market savings as you can earn more interest in the money market verses a regular savings account. This I never knew!

We were also looking at the cost to refinance the house and were debating if it is worth it, we already have a low rate of 6.37 so we really wanted to wait for the rates to go below 6% to refi because no matter which way we look at it closing costs will be approximately $2500. But we have PMI (Principal Mortgage Insurance) that we are required to pay until our home value drops below 80% of the home value. We are currently at 90% but it would take an arm and a leg to get it below that 80% quick. So long story short we are looking at switching to an FHA loan which will cut our mortgage insurance in more than 1/2 and at at 6% rate we will save $150+ per month. Over a year that is a ton of money... but we have been hanging on to paying the $2500 closing costs... and debated paying them in cash to save the amount of our loan by $2500 but be found out that the difference in payment will be a couple of dollars per month and we found that all of our closing costs again will be tax deductible! So in all - we are waiting for trusty Jim to give us a call as soon as the rates are 6% or less to start our refinance process. In all that min. $150 savings each month adds up to over $1800 a year which we have decided that we can stick into a Roth IRA for Paul so that we can make our later retirement slightly more cushy!

Anyhow - new information to me - mortgages sometimes are hard to figure out and new info is always great so I felt it important to share my new info. Have a great day!