How to get rid of FHA mortgage insurance premiums
FHA mortgage insurance removal is a possibility for many homeowners, despite common misconceptions that the mortgage insurance premium (MIP) is a permanent part of FHA loans.
While some homeowners may experience natural FHA mortgage insurance removal when their insurance lapses, most will need to actively refinance to eliminate it.
Here’s everything you need to know about FHA MIP removal.Check your FHA mortgage insurance removal eligibility. Start here
In this article (Skip to…)
- FHA mortgage insurance
- Mortgage insurance removal
- Refinancing process
- Lower FHA MIP
- MIP costs
- MIP duration
How does FHA mortgage insurance work?
FHA mortgage insurance is an additional cost that borrowers must pay when taking out a mortgage loan backed by the Federal Housing Administration.
This insurance policy protects lenders from the risk of default and foreclosure, making FHA loans less risky for lenders and often more accessible for borrowers.Check your FHA MIP removal eligibility. Start here
When you opt for an FHA loan, you’re required to pay for this mortgage insurance, which consists of two main components: the upfront mortgage insurance premium (UFMIP) and the annual mortgage insurance premium (MIP).
Upfront mortgage insurance premium
UFMIP is a one-time fee that you’ll need to pay when you close on your home. This fee is typically 1.75% of your total loan amount.
For instance, if you’re entering the real estate market with a $200,000 loan, you’d be looking at a UFMIP of $3,500. This can either be paid in cash at closing or rolled into your mortgage, adding to the base loan amount. If you choose to roll it into your loan, it will slightly increase your monthly mortgage payments.
Keep in mind that if you later decide to refinance for FHA mortgage insurance removal from an FHA loan to a conventional loan, this upfront fee is not refundable. Although you may be entitled to a partial FHA MIP refund if refinancing into another FHA loan within three years.
Annual mortgage insurance premium
MIP is an ongoing cost that you’ll pay over the life of the loan. This premium is calculated based on your base loan amount, mortgage term, and loan-to-value (LTV) ratio.
Unlike the UFMIP, the annual premium is divided into 12 monthly payments and added to your regular mortgage payment. This means you’ll be paying a little extra each month as part of your mortgage payment.
This monthly mortgage insurance premium is mandatory, regardless of your down payment amount or the size of your loan.
Step-by-step FHA mortgage insurance removal guide
FHA loans come with a required mortgage insurance premium (MIP). You have to pay this both upfront and monthly, regardless of your down payment—even if it’s over 10%.Check your FHA MIP removal eligibility. Start here
However, you might be able to cancel these MIP payments. This depends on when you got your loan or how much you initially paid down. Check the following steps to see what you can do in your situation.
1. Check your eligibility
The first step in the process of FHA mortgage insurance removal is to understand which option you qualify for. To eliminate the annual mortgage insurance premium (MIP) on an FHA loan, you can either:
- Wait for MIP to expire: One pathway to FHA mortgage insurance removal is if you put down at least 10% when you bought the home, your FHA MIP expires after 11 years
- Refinance into a conventional loan: The most common strategy for FHA mortgage insurance removal is replacing your FHA loan with a conventional loan eliminates the FHA’s MIP requirement. This is the only FHA MIP removal option if you put less than 10% down
The good news is that home values are rising nationwide. So many FHA homeowners have enough equity to refinance into a conventional loan and cancel mortgage insurance, even if they only bought a few years ago. You can check your eligibility for FHA mortgage insurance removal with a lender.
Keep in mind that these rules only apply to the MIP on an FHA loan. Mortgage insurance for a conventional loan is commonly referred to as PMI, or private mortgage insurance. Homeowners often confuse MIP and PMI, but cancellation rules differ vastly. Thankfully, PMI cancellation on a conventional loan is generally much more straightforward.
2. Review your options
It could be possible to eliminate your FHA mortgage insurance premium without refinancing. But only if you got your loan before 2013 or put at least 10% down when you bought the home. If your MIP won’t expire on its own, you will need to refinance out of your FHA loan to eliminate its MIP.
Here’s what you need to know about your FHA mortgage insurance removal options.
Automatic FHA mortgage insurance removal
- If you received your FHA loan before June 3, 2013, you were eligible for MIP cancellation after five years. But you must have 22% equity in the property, and you must have made all mortgage payments on time.
- For homeowners with FHA loans issued on or after June 3, 2013, you must refinance into a conventional loan and have a current loan–to–value ratio of 80% or lower.
Loan-to-value ratio (LTV) is another way to measure your home equity. For example, if you owed $160,000 on your home that’s valued at $200,000, your LTV would be 80% because the loan balance ($160,000) is 80% of the home’s original value ($200,000).
An LTV of 80% means you have 20% home equity which should be enough to refinance into a conventional loan with no PMI.
Your down payment was 10% or more
- If you got an FHA loan after June 3, 2013, then your MIP will go away after 11 years of on-time payments, provided you put at least 10% down.
- If you put less than 10% down, you’ll pay MIP until the loan is paid in full or refinance into another mortgage loan type, such as a conventional loan.
Refinance to remove FHA MIP
Most FHA homeowners today have a loan with the following terms:
- Opened on or after June 3, 2013
- Less than 10% original down payment
- 30–year loan
These FHA mortgage loans are not eligible for automatic mortgage insurance cancellation. So for FHA mortgage insurance removal, you’d need to refinance out of your FHA loan.
The good news is that there are no restrictions on refinancing out of FHA into a conventional loan with no PMI. Plus, there are never any prepayment penalties on FHA loans. So you can mortgage refinance any time you want.
“After sufficient equity has built up on your property, refinancing from an FHA or conventional loan to a new conventional loan would eliminate MIP or PMI payments,” says Wendy Stockwell, VP of operations support and product development at Embrace Home Loans. “This is possible as long as your LTV is at 80% or less.”
In terms of FHA mortgage insurance removal, this means:
- You will need about 20% home equity to refinance. To find your home equity, subtract your current mortgage balance from the value of your home.
- You also need a credit score of at least 620 to refinance into a conventional loan with most loan servicers. The higher your credit score, the more you could save on your monthly mortgage payments.
- Lastly, make sure your debt ratios are in line for qualifying for a standard conforming loan. The limits are typically higher when it comes to FHA loans.
3. Contact your lender
If you want to stop paying MIP on your FHA loan, you need to inform your lender, unless it’s already been canceled, or you’re planning to refinance.
FHA mortgage insurance removal
- For loans started between January 2001 and June 3, 2013, MIP usually cancels automatically when you reach 22% equity in your home.
- If your loan began on or after June 3, 2013, and you put down more than 10%, your MIP should stop after 11 years.
Otherwise, MIP lasts for the entire loan duration.
After canceling MIP, check your statements to make sure you’re not paying it anymore. If you still see MIP charges despite being eligible for cancellation, contact your lender. They’ll verify your eligibility and then can remove the MIP.
Refinancing your FHA loan
To refinance for FHA mortgage insurance removal, apply for a new mortgage as you would normally. Inform your lender that you want to switch your FHA loan to a conventional loan to eliminate MIP.
Your loan officer will then gather details about your current mortgage and begin the approval process. Once your new loan is finalized, it will pay off your FHA mortgage. You’ll then have a new loan with a different monthly payment, interest rate, and loan term.
How to get rid of FHA MIP with a mortgage refinance
The mortgage refinancing process is straightforward. All you need to do is apply with a mortgage lender. Let your loan officer know you want to refinance into a conventional loan and cancel FHA MIP. Be sure to add closing costs to your existing loan balance if you wish to avoid paying them out of pocket.Check your FHA MIP removal eligibility. Start here
Begin the mortgage refinance application
Start by applying for a refinance with a mortgage lender. Make sure to tell your loan officer that your aim is to achieve FHA mortgage insurance removal by switching from an FHA loan to a conventional loan.
If you prefer, you can add the closing costs to your new loan balance to avoid paying them immediately. This can help you save money in the short term, but keep in mind that it will increase your overall loan amount.
Assessing eligibility for a conventional loan without PMI
The lender will then proceed to determine if you qualify for a conventional loan without PMI. This process involves:
- A fresh home appraisal to assess the current value of your home.
- A comprehensive review of your credit score and history.
- Verification of your income and employment details.
Completing the underwriting process
Upon meeting the conventional financing requirements, your lender will assist you with the rest of the application and approval journey.
Once your refinancing is finalized, your new conventional loan will take the place of your previous FHA loan. This means you’ll no longer need to pay premiums and your FHA mortgage insurance removal is complete.
As a bonus, you might also get a lower interest rate via the refinance process, provided your personal finances are strong enough to qualify for a better rate.
Can you lower your FHA mortgage insurance premiums?
Not everyone is eligible for a conventional refinance, and that’s ok. Even if complete FHA mortgage insurance removal isn’t possible for you, there may still be options available to reduce your FHA mortgage insurance costs.Check your FHA MIP removal eligibility. Start here
You may have a higher rate of MIP than what is available today because these rates have decreased since 2015. The most recent FHA MIP cut of 30 basis points took effect on March 20, 2023.
Here is a history of FHA MIP rates charged by the Federal Housing Administration:
- Prior to January 2008: 0.50% annual MIP
- October 2008: 0.55% annual MIP
- April 2010: 0.55% annual MIP
- October 2010: 0.90% annual MIP
- April 2011: 1.15% annual MIP
- April 2012: 1.25% annual MIP
- April 2013: 1.35% annual MIP
- January 2015: 0.85% annual MIP
- March 2023: 0.55% annual MIP
If you received a loan in January 2015, you could refinance into today’s lower FHA MIP and save $300 per year for every $100,000 borrowed. Plus, you may save even more by getting a lower mortgage rate.
Keep in mind, though, that your new FHA loan’s MIP will become non–cancelable. That’s because your new loan will originate after June 2013, when FHA MIP rules changed.
Reduced upfront and monthly MIP for certain refinancing homeowners
If you got your FHA loan prior to May 31, 2009, you can receive lower MIP rates via an FHA Streamline Refinance. And your original upfront cost may be credited toward your new upfront cost.
Eligible candidates receive an annual MIP of 0.55% (standard is 0.85%) and a reduced upfront MIP of 0.01% (standard is 1.75%). That’s a savings of $3,480 upfront and $50 per month on a $200,000 loan. However, you’ll need a perfect payment history for the past three months to qualify.
How much does FHA MIP cost?
MIP costs vary depending on a number of factors, including your mortgage term and down payment amount. Lower monthly mortgage insurance premiums are typically associated with shorter terms and larger down payments.Check your FHA MIP removal eligibility. Start here
- FHA UMIP is 1.75% of the base loan amount. For example, if you have a $200,000 loan, the UFMIP would be $3,500. This can either be paid in cash at closing or rolled into the loan amount.
- MIP: Variable depending on loan size, term, and LTV ratio, but can range from 0.45% to 1.05% of the loan amount, divided into 12 monthly payments and added to your regular mortgage payments.
Below is the full breakdown of the current MIP cost for FHA mortgages with terms of over 15 years.
|Original Loan Amount
|Loan to Value Ratio
|$726,200 or less
|$726,200 or less
|>90% and ≤ 95%
|$726,200 or less
Although nobody wants to pay MIP, it is a critical aspect of the FHA loan program. It helps lenders offer loans to those with lower credit scores or first-time home buyers who might not qualify for other types of mortgages.
How long does FHA MIP last?
Most current FHA loans fall into two categories. Those with case numbers issued before June 3, 2013, and applications made on or after that date. Your FHA MIP removal will depend on this deadline because that’s when FHA rules changed.Check your FHA MIP removal eligibility. Start here
FHA loans for which you completed an application on or after June 3, 2013:
Modern FHA loans have simplified their MIP schedule. The size of your down payment determines whether MIP will expire.
|Original Down Payment
|All loan terms
|Less than 10%
|Life of loan
|All loan terms
|More than 10%
FHA loans for which you completed an application before June 3, 2013:
These older FHA loans use a more elaborate MIP schedule.
|Original Down Payment
|20, 25, 30 years
|Less than 10%
|78% LTV after 5 years
|20, 25, 30 years
|78% LTV after 5 years
|20, 25, 30 years
|More than 22%
|Less than 10%
|More than 22%
FAQ: FHA mortgage insurance removalCheck your FHA MIP removal eligibility. Start here
FHA MIP is the mortgage insurance program for FHA loans. It includes an upfront charge equal to 1.75 percent of the loan amount, as well as a monthly premium included in your mortgage payment. This insurance coverage protects FHA lenders, allowing them to offer competitive rates on FHA loans even when the borrower makes a small down payment and has only average credit.
FHA mortgage insurance removal is possible without refinancing but only in certain instances. For example, if you got your loan before 2013 or put at least 10% down when you bought the home. However, if your MIP won’t expire on its own, you will need to refinance out of your FHA loan to eliminate its MIP.
PMI (private mortgage insurance) is required on conventional loans with less than 20 percent down of the home’s purchase price. But the rules are different for home buyers using an FHA loan. All FHA loans require mortgage insurance premium (MIP), regardless of down payment size. So you will have to pay FHA mortgage insurance even if you put down 20 percent or more.
Mortgage insurance (PMI) is removed from conventional mortgages once the loan reaches a 78 percent loan–to–value ratio. But FHA mortgage insurance removal is a different story. Depending on your down payment, and when you first took out the loan, FHA MIP usually lasts 11 years or the life of the loan. MIP will not fall off automatically. To remove it, you’ll have to refinance into a conventional loan once you have enough equity.
If your FHA loan originated before June 3, 2013, you might qualify for FHA mortgage insurance removal. Those older FHA loans are eligible for MIP elimination when the loan balance reaches 78 percent LTV or lower. If your FHA loan originated on or after June 3, 2013, you are not eligible for FHA mortgage insurance cancellation. However, if you’ve built at least 20 percent equity in the home, you can get rid of MIP by refinancing into a conventional loan with no PMI. Veterans could also look into VA loan options.
Any lender that offers conventional loans by Fannie Mae and Freddie Mac can assist in FHA mortgage insurance removal through refinancing. Additionally, any FHA-approved lender can help you reduce your payments via an FHA Streamline Refinance loan. Shop around for the best rates. While most loan servicers in the U.S. offer conventional and FHA loans, each one will offer different rates for them.
A cash-out refinance can provide funds for anything from paying off credit card debt to home improvements. Conventional cash-out loans allow you to take up to 80 percent of your home’s value. If that’s more than your existing balance, you get to keep the extra cash and avoid PMI. There is also an FHA cash-out refinance. It allows loans up to 80 percent of your property value. However, you will still pay FHA mortgage insurance. So it’s best to consider the conventional version first.
If you currently pay PMI or MIP, you can get rid of it by refinancing once your home reaches 20 percent equity. If you’re shopping for a new home loan, look for options that allow no PMI even without 20 percent down. These include piggyback loans, lender–paid mortgage insurance, or a specialized mortgage program that doesn’t require PMI.
Almost all FHA borrowers pay the same mortgage insurance rates. That includes an upfront mortgage insurance premium (UFMIP) equal to 1.75 percent of the loan amount and an annual mortgage insurance premium (MIP) equal to 0.55 percent of the loan amount. Though it’s charged annually, this premium gets divided into 12 monthly mortgage insurance payments added to your mortgage payment. On a loan balance of $200,000, MIP would add $91.66 a month to your mortgage payment.
FHA mortgage insurance rates do not go down each year. But your premium payments do. That’s because mortgage insurance payments are calculated based on your loan amount. So as your loan balance goes down each year, the dollar amount you pay for mortgage insurance is reduced as well.
FHA can increase mortgage insurance at any time. But your existing MIP will not go up. As long as you stick with your original FHA loan (and don’t refinance into a new FHA mortgage), you’ll continue to pay your original mortgage insurance rate for as long as your MIP is due.
Having mortgage insurance is often worth it. That’s because FHA loans with MIP let you buy a home with a much smaller down payment than you could otherwise. FHA loans are also extra lenient about credit. So if you don’t qualify for a mortgage without MIP, it might be best to bite the bullet and pay mortgage insurance for a few years. You’ll start building equity sooner. And you could refinance into a conventional loan with no PMI once you have 20 percent equity.
Bottom line on FHA mortgage insurance removal
The best way to achieve FHA mortgage insurance removal is to refinance into a conventional loan or a government-backed loan, such as a VA loan or a USDA loan.
So contact a lender to get a refinance rate quote. Mortgage quotes come with an eligibility check and potentially an estimate of the home’s appraised value.
Get a quote and get started canceling your FHA MIP today.Time to make a move? Let us find the right mortgage for you