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Subject:  FHA Streamline Refinance Date:  5/7/2013  3:44 PM
Author:  JamesBrown Number:  307001 of 312185

I received a letter from my mortgage holder (Wells Fargo) telling me that due to "recent guideline changes" I could reduce my FHA mortgage insurance premiums if I refinance to a new FHA mortgage. So I called the number, talked to a nice woman, and I want to run the numbers past this helpful board to see if I'm missing anything.

Currently, I've owned this home since 2003 with no plans to move in the near future. The appraisal price back then was $118K and after a decade of appreciation it is currently appraised for $119K. (Ain't real estate speculation grand?) The current mortgage balance is $95K with about 20 years to go on the mortgage, fixed rate of 5.5%

Wells Fargo cooked up two scenarios:

1) A new 30-year loan at 4% which would reduce my monthly payment by $200.

2) A new 15-year loan at 3.625% which would increase my monthly payment by $33.

She said something about lender's credit which allows them to roll the closing costs of $2800 into the loan, and since the loan is older than 2009, there's no change in PMI.

On the face of it, the second option sounds good. For the price of a restaurant meal every month, I can shave five years off my mortgage, about $40,000 of payments if I calculate right. On the other hand, I've heard about the old, "Take a 30-year mortgage but make the 15-year payment to buy some breathing room during financial rough waters" argument. If I did go for the 30-year mortgage, I would essentially keep making the same payment I've been making for a decade and thus plow an extra $200 directly into the principal every month.

If the savings worked out essentially the same, I might lean toward that 30-year mortgage with an eye toward that lower payment should I lose my job (I'm the only breadwinner in my family.)

Any thoughts would be appreciated. Thank you.
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