I try to read dozens of news articles everyday. That news can be related to sports, political news, international subjects, or finance. Today CNBC had an article entitled “Why Aren’t You Refinancing Your Mortgage?” And I got to thinking about our own situation. I have stated in the past that I was going to look into refinancing our home. I would like to refinance to a lower interest rate and keep it at the same amount of time we have left on the mortgage (we have 161 months left to go). There are two things keeping us from refinancing.
First, n order to refinance and avoid PMI (private mortgage insurance) you have to have a LTV (loan to home value) of 80%. In other words, if your home is worth $200,000 your mortgage should be $160,000. As of today I am not sure what our home is worth compared to our mortgage. We currently owe about $158000. We bought the house for just over $182000 and I put 5% down. However, we were told that the home was valued for more. I am not sure in the short-time we have owned the home that it has gained enough value to justify a refinance. IF it has gained about 3% a year we still probably fall a little short.
Additionally, when I went to inquire about refinancing with our current mortgage company they said they would only re-mortgage based upon the purchase price and we aren’t even close to refinancing if that is the case. We would have to wait about another year or so. Yes, I have thought about shopping around to other lenders and I have, sort of, but that leads me to my second and biggest reason for not refinancing.
Second, I don’t have the closing costs to refinance. When you refinance your home it is like you are buying it all over again. You have to pony up, typically, a few thousand dollars in order to refinance. After paying out taxes and trying to get a little ahead on our mortgage (see this post for more details) I just don’t have 3-$5000 to pay for closing costs. Now you can roll those closing costs into the mortgage, but I already did that the first time and I am not sure I want to do that again. That would only increase our debt and I am not sure I want to do that.
So when CNBC asks why haven’t you refinanced your mortgage? That is my answer, particularly #2. If anybody has some ideas about dealing with this I am all ears.