Refinancing Today Could Be Beneficial for One in Three FHA Borrowers
The Urban Institute reported on Monday that nearly one in three FHA borrowers could save a significant amount of money over the course of their home loans if they were to refinance today.
With President Barack Obama’s proposed 0.5 percentage point cut in the Federal Housing Administration’s annual Mortgage Insurance Premium, combined with today’s historically low mortgage interest rates, current borrowers could stand to save nearly 1 percent if they refinance now.
“In general, borrowers stand to save money by refinancing if the new mortgage rate and the new FHA premiums, combined, result in a 0.75 percent reduction or more in annual mortgage costs,” Metro Trends bloggers Karan Kaul and Laurie Goodman wrote. “Some borrowers are more conservative, of course, and might wait until their annual mortgage cost savings hits 1 percent to refinance, resulting in less refinance activity. Other borrowers are aggressive and might jump in when they stand to gain only 0.5 percent, which would result in more refinance activity.”
Image via flickr/Simon Cunningham