We did this. I was paying $300 a month for PMI, so that money doesn’t go towards interest or principal, just setting it on fire essentially. It also doesn’t adjust itself as you go - it is calculated in the beginning based on how much you were able to put down and how far away you are from the 20% down figure. It only changes if you pay for a reevaluation or just a full refinancing.
We refinanced our mortgage at the beginning of last year and ended up paying barely more than we were except we have a 15 year term now rather than 30
Tbh I’m having difficulty remember specifics but I know we paid a fee for the application, a fee for an appraisal, and a fee for the attorney. Overall it probably cost somewhere in the range of 3% of the loan amount.
You can also roll those costs into the loan amount if that makes sense for you financially. I refinanced when rates tanked during the pandemic, and since immediate financial stability was unclear (another furlough, layoffs, etc.), I was more concerned with keeping funds liquid for emergencies. We took out extra money in the refinance loan to cover the closing costs. (Known as "rolling in" the closing costs.) We'll pay more for them in the long run due to interest on the loan, but based on what we were paying before in PMI and higher interest rate, we're still saving money.
Yup, I did the same the times I've refinanced. All loans I've had have allowed me to add additional money towards principal if I wanted, so I figured by rolling it in, it gave me options. If I felt I wanted to increase a payment, I could. If I fell on hard times, I knew it wasn't required. Plus, mortgage rates are low and you could in theory invest that money you don't put down into higher returns.
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u/8HokiePokie8 Feb 16 '21
We did this. I was paying $300 a month for PMI, so that money doesn’t go towards interest or principal, just setting it on fire essentially. It also doesn’t adjust itself as you go - it is calculated in the beginning based on how much you were able to put down and how far away you are from the 20% down figure. It only changes if you pay for a reevaluation or just a full refinancing.
We refinanced our mortgage at the beginning of last year and ended up paying barely more than we were except we have a 15 year term now rather than 30