We try it!

We Try It: Refinancing a House

This week’s post was nearly 90 days in the making. At the beginning of 2013, when my husband and I looked at our tax return, we thought it would be wise to refinance our home. Our interest rate of 6.25% was, after all, so 2006.

So we called up our bank, and said we’d like to refinance. Our goal was to lower our monthly mortgage payment so that we can improve our monthly cash flow and eventually buy a bigger home.We gave them every bit of information about ourselves, minus a DNA sample. An appraiser came out to our house and wrote up a report, and we were optimistic. Assuming our appraisal came back roughly 10% more than we owe on our home, we’d switch our FHA mortgage (with it’s ridiculous mortgage insurance premiums) to a conventional mortgage, and we’d be on our merry way.

Monopoly board on fire.

You know what they say about assuming, right?

Our appraisal came back stating our house is worth less than what we owe – a lot less. Due to foreclosures in the neighborhood, our appraisal value has plummeted. Our county assessor hasn’t realized this, but the bank unfortunately has. Fortunately, there’s help. It’s not a lot of help, but FHA loans are eligible for streamline financing, which skirts the appraisal process. It does, however, rely heavily on current income, and therefore, current employment. The bank called my boss no less than three times in three weeks to verify that I was still employed with the company.

All in all, after nearly finishing the process for a conventional loan, and then starting all over again for an FHA streamline, we managed to refinance our house. Our closing costs were low, and the monthly savings will cover those costs in one year. Our new interest rate of 3.87% is pretty sweet, and our new monthly payment is about was I was paying in rent – in 1998. Granted, if we do nothing else but pay our monthly payments, we’ll be paying for this house until 2043, but hey, it’s a roof over our heads!

photo credit: alles-schlumpf via photopin cc

5 replies on “We Try It: Refinancing a House”

If your FHA loan was endorsed prior to June 1, 2009 you can refinance with the FHA streamline with reduced upfront and annual fees. This is only available until the end of 2013. The streamline does not require an appraisal, so value will not be an issue.

I was lucky not to have an FHA mortgage, but the refinancing process was almost as long as yours was– 4 months from start to finish. Granted, now I’m saving 400 bucks a month — at least until the next property tax hike — and I guess I’m glad we did it, but what a pain in the ass.

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