I am thinking of getting a streamlined FHA 203k loan for a home. The loan is for $101,300. The best offer I could find is 4% interest, but because of required insurance fees, I would pay $630.13 a month for 360 months. In the end, I will end up paying $226,846.8. I was told that after a year I could refinance to a conventional loan with a lower rate (currently at 3.75%) and ditch the mandatory FHA mortgage insurance fee (currently $113.05).

Assuming the interest would be lower than what I have now 4%, hopefully staying at 3.75%, would it be wise to refinance after a year so I can loose the $113.05 required mortgage insurance fee and hopefully lower my monthly payments or just keep the loan as it is. Since I guess the new refinance will take into account the original loan amount plus the interest. Please correct me if I am wrong. There is a $25 Hazard insurance fee in the monthly payment which I doubt I can get rid of.

1 Answer 1


There is no guarantee that interest rates will stay at their historic lows. The Federal Reserve is ending their bond buying program, so rates will likely rise. It's also possible that for any number of reasons your home may lose value in the next year, so you won't be able to sell or refinance for several years more.

As with any market, you should make your decision based on the fundamental value of the deal to you personally, and you should not depend on being able to make a deal or refinance in the future. During the years that the housing bubble was inflating very few were considering what a downturn in the market would mean for them and the loans they couldn't afford.

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