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I have an existing FHA insured loan taken out in June 2002, I refinanced a year later in 2003 at 6% which is what I'm in now, I currently have 18 years remaining but my lender has told me that I will have to pay PMI for the life of the loan because I didn't pay any UFPMI but the lender cannot produce any paperwork that I signed agreeing to the fact nor do I have any paperwork in my closing documents from 2003.

I have inquired with another lender to do a 30 year streamline refinance at 4.375% no appraisal with total fees at @$1800, after a lender credit of $1200. using the original value of the home at $98,500 and my current balance of $78,300 at the same monthly MIP I am paying now around $33 a month. My P&I would decrease $174 a month. I plan to stay in this condo since I am a 50 year old disabled individual and have limited income.

A few questions. Since my original FHA case number was issued prior to June 2009, will the monthly MIP continue for the life of the loan or will it drop off after 5 years? Also, given the facts of the new loan, is adding 12 years to the loan at the lower rate a wise choice? Should I pay for a new appraisal which would come back easy at $120K to lower the LTV?

I hope I didn't leave anything out but any feed back would help, as I am having a difficult time deciding if I should continue with my current lender or start the new loan.

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I have closed on 3 mortgages and 1 refinance. My first mortgage was FHA, and my refinance was a FHA streamline refinance so I have experience dealing with your question. Based on my personal experience and research, your MIP (Mortgage Insurance Premium, you referred to as PMI or Private Mortgage Insurance) is eligible to be canceled. See HUD.gov Discontinuing Monthly Mortgage Insurance Premium Payments

On a 30 year loan term, your LTV (Loan-to-value) ratio must be 78%. You are very close but not quite there ($78300 / $98500 = 79.5% LTV)

I want to help to calculate if you should do the refinance or not. First you need to know that you qualify for an upfront MIP Exception since your loan origination date was before May 31st, 2009.

From: http://themortgagereports.com/7570/fha-mip-cancel

If your current FHA loan was endorsed on, or before, May 31, 2009, you can refinance for cheap.

For such "grandfathered" borrowers, upfront mortgage insurance premiums drop for 1.75 percent to just 0.01%, or $10 per $100,000 borrowed.

In addition, annual MIP rates drop from a maximum of 1.55 percent to just 0.55%, lowering an FHA loan's "effective" mortgage rate by a full percentage point. Premiums are the same across all 15-year and 30-year mortgages, regardless of LTV.

I used a couple of spreadsheets I have used for my loan calculations in the past. Using the numbers you gave me, you've already spent approximately the following amounts on your current mortgage:

  • Interest Paid: $64,760
  • Principal Paid: $20,712
  • Total: $85,472

If you continue with your current loan, your total spend as of your last payment in June 2032 will be $219,290

If you refinance, your total spend as of your last payment in July 2044 will be $141,158

  • Total already paid: $85,472
  • Total to be paid on new refinance at 30 years: $141,158
  • Total spend on house after refinance: $226,630

As you can see, you will spend more in the long term if you refinance. However, that doesn't take into account any tax changes and it assumes you make NO extra payments on the new refinance. If you take $50 of your monthly loan savings and apply it to the principal amount of your refinance loan, you will save $8,780 in interest, and reduce your total payments on the refinance loan to $126,600, making your TOTAL spend on the house $212,072 and the refinance will be paid off in 2038.

Given those calculations, and assuming you have the discipline to make a small extra payment on your refinance, I believe it would be a wise choice. It will be nice having the extra monthly cash flow as well.

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