Today we were able to pay off the rest of the balance on the mortgage in order to remove pi payments. Although most people would suggest not getting a house without at least 20% down, for us, in this case it actually made sense. Even with pmi payments, which for us were lower than $25 a month, our total mortgage payment per month is less than the cost of rent would have been at our old apartment (by $50). While we probably could have put enough of a downpayment on our house to avoid pmi payments, we decided to keep ahold of $10,000 for any unexpected expenses that came with new home ownership. With the interest rate we got for the mortgage, it made the most sense for us.
However, now that pmi will be gone, we are considering refinancing into a 15-year mortgage with more than a 1% interest rate decrease. When we bought our house in September, we bought it on just my salary because LD was just starting a temp-to-hire position and we were uncertain about whether he would even have a job in January. Therefore, we wanted to keep mortgage payments as low as possible in order to give us some flexibility. However, since then, we have been able to pay off some student loans completely, making our base monthly expenses much less than they were previously. So, although we are maintaining a lifestyle where all expenses except extra payments are based on my salary, we can comfortably refinance to our preferred loan length because our monthly payments will only increase by around the same amount that our paid off student loan minimums were. Over the length of the loan, I calculate that we will save around $50,000 with the refinance (adjusting for extra closing costs for refinancing).
What advice do you have about refinancing mortgages? Have you done it in the past? What were your reasons?