Strategy 68 of 107
FHA borrowers: a streamline refinance at the same payment
What it is
With an existing FHA-insured loan, ask lenders about a streamline refinance; it needs less paperwork.
Steps
- With an existing FHA-insured loan, ask lenders about a streamline refinance; it needs less paperwork.
- It must show a real benefit, such as a lower rate.
- Keep paying the old amount; the difference goes to principal.
Repeat: Whenever rates fall enough to cover costs.
Measure: Months to payoff at the new rate and old payment.
Try it in the calculator Enter its amount in "New rate, same payment". Add a payoff goal of 5 years to see what is still needed.
Risks
- Costs and mortgage insurance premiums.
- A new 30-year term undoes the benefit unless the old payment is kept.
Who it fits
Average household, Single, No high school diploma, No college degree, College students, Grandmas and grandpas (62 and over), Married couples, Newlyweds
Needs
Current loan is FHA
How predictable
Most predictable: once in place, the payoff date is arithmetic
A worked example (hypothetical, not guaranteed)
Picture a hypothetical household (average household). They owe $300,000 at 6.5% with 30 years left. The required payment is $1,896 a month, and that payment, which comes from income, never changes in this example.
They follow the steps: with an existing FHA-insured loan, ask lenders about a streamline refinance; it needs less paperwork.
Suppose it brings a new rate of 5.5% while they keep paying the old $1,896 payment. The loan would be paid off in 23 years 7 months instead of 30 years, saving about $147,106 in interest. To finish in five years, they would still need about $3,834 a month more from other strategies. That is why the five-year sequences stack several at once.
The amount above is chosen only to show the arithmetic. It is not an estimate of what this strategy will produce for anyone. Put real numbers from the fact finder into the calculator.
Sources and more information
Where to get help
- CFPB: Find a HUD-approved housing counselor (free or low cost) consumerfinance.gov
- CFPB: Submit a complaint about a lender or servicer consumerfinance.gov
Related strategies
- 66. Audit the servicer: make sure every extra dollar hit principal
- 60. Claim your state's property tax credit or circuit breaker
- 57. Re-shop auto insurance and send the savings to principal
- 79. Owe an individual? Offer a discounted lump-sum payoff
- 56. Raise insurance deductibles once a reserve covers them
- 55. Phone or internet discount through Lifeline