Monday, December 26, 2011 - Article by: Brian Mayer - Equity Resources -
As of December 7, 2011 USDA is now charging 1.5% up front and .3% annually as monthly mortgage insurance for all USDA Refinances.
Frankly this is not great news for anyone considering refinancing their USDA loan. With interest rates as low as they are today it means many can still gain a huge benefit from refinancing their USDA Loan. There are several factors when considering a USDA Refinance but lets clear up a few guidelines first
In order to determine if you should refinance you should talk to a USDA specialist so lets consider the following.
Lets look at a typical scenario we might see today and look at the numbers.
Okay we take the current loan of $250,000 + 1.5% up front MI = $253,750 + $5,000 closing costs = $258,750 Now we take the new loan amount of $258,750 and add the .3% annual mortgage insurance to the 30 year fixed rate at 3.875 and your new payment is $1,281.43
Years until you are making money back on your refinance = 3.88 years
Of course people refinance for many different reasons and there is no simple formula that covers every scenario. The above scenario would save someone almost $70,000 over 30 years.
Unfortunately you can not take any cash out on a USDA Loan and you can not shorten the term of the loan due to the fact that there is only a 30 year fixed rate loan option. If you are considering a refinancing your USDA loan make sure you speak with someone who knows all the ins and outs of this uncommon mortgage loan.
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