Make Home Affordable: Conventional refi out of the question

Almost forgot to mention this. Obviously, US Bank never got back to me about a Home Affordable Refinance. Funny, I’m pretty sure that if I missed a payment I wouldn’t even have to ask them to call me! Anyway, with rates low again I looked into a conventional refinance. I obtained a few quotes, none of them made me want to seal the deal.

First, it seems impossible to drop private mortgage insurance (PMI) because the value of the house has probably decreased. This is actually what makes the refinance really questionable. I can drop my rate nearly 2 points, but mortgage insurance premiums have gone up drastically since I financed the new house in August 2008.

Second, if you have PMI, you can’t drop escrows. That was something else I wanted to be rid of since it’s always off, and I have that nagging doubt of whether or not taxes and insurance bills will be paid on time. I would rather pay for it myself.

Third, if you don’t want to pay points, the rates are higher. This is obvious of course, but many advertised rates are with points. It was harder than it should be to find rates that really didn’t have points, or high initiation fees, etc.

Put all of this together and it worked out to basically $5000-$6000 out of pocket (or tacked onto the loan) to save $100 a month or less on the payment. Even assuming the cost turned out to be only $4000, it would take 40 months to recoup the expense. Not worth it. Yeah, if I knew for a fact I would be in the house until it was paid off, or ten years or whatever, maybe I would do it. But for me, money in the bank now is worth more than that money in the future.

I wish the Home Affordable thing would have worked out. I have seen that these cost between $2000-$3000 when all is said and done, in which case it would definitely make more sense to go ahead and refinance. Thanks for nothing, US Bank. Good to see my timely payments are reciprocated.

March 19, 2010 В· agw В· No Comments
Tags: , ,  В· Posted in: Finance, House

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