January 22nd, 2015 12:35 PM by Gregg Mower
Do you have a FHA loan on your home? It might just be the right time to refinance that mortgage. As of January 26, 2015 the Federal Housing Administration will be lowering the monthly mortgage insurance rates by .5%. This may not sound like a lot but it does reduce your mortgage payment even if you don’t change your existing interest rate. If you took out a 30 year fixed FHA loan after June 1st 2009 you are paying 1.35% annually for your FHA mortgage insurance. As of January 26, 2015 FHA will be accepting new 30 year fixed rate loans with mortgage insurance of on .85% or less.
At the same time interest rates are hitting historic lows again so this is the perfect time to lock into a low rate and reduce your mortgages insurance. On January 9, 2015 the Federal Housing Administration came out with Mortgagee Letter 2015-01 which state the guidelines lenders must follow for the new lower MIP rates. The letter address when it is to take effect (January 26,2015) and how lenders can re-issue case numbers for clients they already have in process. The letter also gives the new MIP rates for both 30 year loans and 15 year FHA loans. The 15 year MIP rates have stayed the same but the 30 year MIP rate have all been lowered by .5%. With the new rates in the table below:
Term > 15 Years
Base Loan Amt. LTV Previous MIP New MIP
= $625,500 = 95.00% 130 bps 80 bps
= $625,500 > 95.00% 135 bps 85 bps
> $625,500 = 95.00% 150 bps 100 bps
> $625,500 > 95.00% 155 bps 105 bps
Term = 15 Years
= $625,500 = 90.00% 45 bps 45 bps
= $625,500 > 90.00% 70 bps 70 bps
> $625,500 = 90.00% 70 bps 70 bps
> $625,500 > 90.00% 95 bps 95 bps
bps=basis points which are a fraction of a percentage. Example 80bps= .8% so a $100,000 loan amount would have an annual MIP of $800 or /12 $67 a month with the new MIP figures lowering the monthly payment from $109 a month a savings of $42 a month.
As you can see the reduction in the Mortgage Insurance can be significant and increases with higher loan amounts. So if you have a $300,000 FHA mortgage on your home you took out last year and your loan to value was greater than 95% (you bought the house and put 3.5% down) your monthly mortgage insurance payment is $337 a month if you were to refinance your new mortgage insurance payment would be $212 a month a savings of $124 a month in your payment. That would be worth the effort to refinance your mortgage in itself. Well if you took out your mortgage this time last year you may have a an interest rate of 4.375-4.875% with rate today in the 3.5-3.875% you would also see a savings in the lower rate as well.
Let’s do an example of a refinance of a home that was bought January of 2014 and say you have a $300,000 loan amount. And an interest rate of 4.5%. We already did the number for the reduction of the FHA Mortgage Insurance of a savings of $124 a month. The new interest rate at 3.75% will save another $130 a month for a total of $254 a month that is $3,050 a year. So if you have been considering a refinance now is the time.
If that has not convinced you to refinance and you think it will be a big hassle let me entice you with another little known fact. FHA has a program to refinance your home that does not require an appraisal or income verification. It is call a streamline refinance. We have a whole page on the Streamline Refinance but I will give a quick overview. The basics of the streamline are that you have made your mortgage payment on time for the last 12 consecutive months and you have an FHA insured mortgage. Then all we do for you is prepare the FHA loan paperwork. You provide us your current mortgage statements and a copy of your home owner’s policy and a copy of the Note, and we do the rest. You don’t even need to have good credit, although it will help with the interest rate. We can even refinance your non-owner occupied FHA loan with Streamline Refinance.Now you may ask what it will cost you to do this. The answer is we tailor make the loan so that you have no out-of-pocket expenses. That's right you don't have to pay any additional costs to lower your mortgage payment. With FHA Streamline loans your loan amount can't go up either, we pay the fees for you. You do have the option to pay fees and reduce your interest rate even further, but in most cases that is not cost effect to do. We run the numbers for you so you can make the decision on paying fees or not. It does not matter who your existing lender is or who did the loan for you originally we take care of everything for you and we are paid from the lender who buys the loan. Oh, by the way, as a Mortgage Broker we get wholesale interest rates and pass those savings on to you.
Let us help you today click here and complete the form or call us to get the ball rolling. Our number is 916-672-6130 we are licensed to lend on California properties, we hope this information was helpful.