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.
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FHA mortgage insurance is an additional cost that borrowers must pay when taking out a mortgage loan backed by the Federal Housing Administration (FHA). Because FHA loans have less stringent requirements than conventional loans, such as lower down payment and credit score minimums, the FHA requires mortgage insurance to offset the increased risk of default and foreclosure.
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 current loan amount.
Example: if you borrow $200,000, your UFMIP would be $3,500. This can either be paid upfront 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.
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 ratio (LTV).
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. For most borrowers, the annual MIP rate is 0.85% of the loan amount.
Example: On a $200,000 loan, this would translate to $1,700 per year, or about $142 per month. However, if your original down payment was 10% or more, your annual MIP may be lower.
Homeowners often confuse FHA mortgage insurance premiums (MIP) and private mortgage insurance (PMI) for conventional loans, but their cancellation rules differ vastly. Thankfully, PMI cancellation on a conventional mortgage is generally much more straightforward.
However, unlike PMI on conventional loans, FHA MIP usually lasts for the life of the loan, unless you made a down payment of at least 10%. This means you could be paying monthly mortgage insurance premiums for the duration of your 30-year loan if you don’t take action to remove it.
Fortunately, you have options for FHA mortgage insurance removal. Here’s what you need to know.
There are two main ways to remove FHA mortgage insurance: automatic termination and refinancing.
The eligibility criteria for automatic MIP cancellation depend on when you took out your FHA loan and your original down payment amount.
If you received your FHA loan before June 3, 2013:
If you received your FHA loan on or after June 3, 2013:
If you don’t meet the criteria for automatic MIP cancellation, refinancing to a conventional loan is usually the best way to remove FHA mortgage insurance.
When you refinance, you take out a new loan to pay off your existing FHA loan. If you have sufficient equity (generally 20% or more), you can refinance into a conventional loan without any mortgage insurance required.
Regardless of which option you choose, to be eligible for FHA mortgage insurance removal, you must meet the following requirements:
Once you’ve determined your eligibility for FHA MIP removal, the next step is to evaluate your options and decide which path is right for you.
If you qualify for automatic MIP termination after 11 years, the decision is easy—you can simply wait for the mortgage insurance to be removed automatically. However, if you don’t meet the criteria for automatic MIP cancellation, you’ll need to weigh the pros and cons of refinancing.
Here are some factors to consider when deciding whether refinancing is a good option for FHA mortgage insurance removal:
If you have sufficient home equity, a strong credit score, and a low debt-to-income ratio, and current interest rates are favorable, refinancing to a conventional loan could be a smart way to remove your FHA mortgage insurance and save money over the long term.
On the other hand, if you don’t meet the equity or credit requirements for a conventional refinance, or if interest rates have risen significantly since you took out your FHA loan, refinancing may not make sense for you.
“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. This is possible as long as your LTV ratio is at 80% or less.”
—Wendy Stockwell, VP of operations support and product development at Embrace Home Loans
Ultimately, the best way to evaluate your options is to crunch the numbers and see how much you could save by refinancing versus sticking with your current FHA loan and mortgage insurance. You can use an online refinance calculator to get a rough idea of your potential savings, but for a more accurate assessment, it’s a good idea to consult with a real estate or mortgage professional who can review your specific situation and provide personalized advice.
If you think you’re eligible for FHA mortgage insurance removal, the next step is to contact your loan servicer. Your servicer is the company that manages your loan and accepts your mortgage payments. You can find their contact information on your monthly mortgage statement or by searching the Mortgage Electronic Registration Systems (MERS) database.
When you call your servicer, let them know you’re interested in removing FHA mortgage insurance. They’ll be able to review your loan details and eligibility, and advise you on next steps.
If you’re eligible for automatic MIP termination after 11 years, your servicer should take care of the process for you. However, it’s a good idea to follow up with them a few months before your loan’s 11-year anniversary to ensure the cancellation is on track.
If you need to refinance to remove MIP, your servicer can help you explore your options and start the application process.
If you decide to refinance to get rid of FHA mortgage insurance, here’s what you can expect from the process.
Refinancing from an FHA loan to a conventional mortgage can offer several advantages, such as:
To refinance into a conventional mortgage, you’ll need to meet the lender’s qualification criteria. Each mortgage lender has their own requirements, but in general, you’ll need:
If you don’t quite meet these criteria, you may still have options. For example, if you have less than 20% equity, you might qualify for a conventional loan with lender-paid mortgage insurance (LPMI). With LPMI, your lender pays for mortgage insurance on your behalf in exchange for a slightly higher interest rate.
If you’re ready for FHA mortgage insurance removal, here are the steps you’ll typically go through when applying for refinancing:
Refinancing to remove MIP payments can take anywhere from a few weeks to a few months, depending on your financial situation and lender efficiency.
Not everyone is eligible for a conventional mortgage 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.
An FHA Streamline Refinance allows you to refinance your existing FHA loan to a lower interest rate, without a new appraisal or income verification. While this won’t eliminate your MIP, it could lower your overall mortgage payment.
To qualify for an FHA Streamline, you must have made at least 6 months of on-time payments on your current FHA loan. You also need to demonstrate that the refinance will result in a “net tangible benefit,” such as a lower payment or shorter loan term.
If you opened your FHA loan relatively recently, you might be eligible for an MIP refund. When you pay your Upfront Mortgage Insurance Premium (UFMIP) at closing, the FHA places that money in an escrow account for a short period. If you refinance or sell your home within the first 3 years of your loan term, you may be able to get a partial refund of your UFMIP.
The amount of your potential refund depends on how far into your loan term you are when you refinance or sell. Here’s a breakdown of the refund percentages:
Example: If you paid a $2,000 UFMIP at closing and refinance your loan after 18 months, you could be eligible for a $1,200 refund (60% of $2,000).
It’s important to note that this refund only applies to your upfront MIP, not your annual mortgage insurance premiums. Additionally, you must refinance or sell your home within the first 3 years of your loan term to be eligible for a refund.
If you think you may qualify for an MIP refund, contact your loan servicer or the HUD Resource Center for instructions on how to request one.
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.
| Loan Term | Original Down Payment | MIP Duration |
| All loan terms | Less than 10% | Life of loan |
| All loan terms | More than 10% | 11 years |
FHA loans for which you completed an application before June 3, 2013:
These older FHA loans use a more elaborate MIP schedule.
| Loan Term | Original Down Payment | MIP Duration |
| 20, 25, 30 years | Less than 10% | 78% LTV after 5 years |
| 20, 25, 30 years | 10-22% | 78% LTV after 5 years |
| 20, 25, 30 years | More than 22% | 5 years |
| 15 years | Less than 10% | 78% LTV |
| 15 years | 10-22% | 78% LTV |
| 15 years | More than 22% | No MIP |
FHA MIP is the mortgage insurance program for FHA loans. It includes an upfront charge (UFMIP) equal to 1.75 percent of the loan amount, and a monthly premium (annual MIP) included in your mortgage payment. MIP protects FHA lenders, allowing them to offer competitive rates even with low down payments and average credit.
How is mortgage insurance (MIP) calculated by FHA?MIP is calculated on your loan’s outstanding principal balance, which goes down as you make payments each month. Most FHA borrowers pay the same mortgage insurance rates: a 1.75 percent UFMIP and a 0.55 percent annual MIP. The annual premium is divided into 12 monthly MIP payments added to your mortgage payment.
Does FHA mortgage insurance go down each year?FHA mortgage insurance rates do not go down each year, but your MIP insurance payments do. As your mortgage balance decreases, the dollar amount you pay for mortgage insurance decreases as well.
Can FHA mortgage insurance increase?FHA can increase mortgage insurance rates 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 based on the home’s original value for as long as your MIP is due.
Does FHA require PMI without 20 percent down?FHA loans require mortgage insurance premium (MIP) regardless of down payment size, even if you put down 20 percent or more. PMI (private mortgage insurance) is for conventional loans with less than 20 percent down.
Can PMI be removed from FHA loans?No, PMI is for conventional mortgages. FHA loans have MIP, which usually lasts 11 years or the life of the loan. To remove MIP, you must refinance into a conventional loan once you have enough equity.
How do I get rid of FHA mortgage insurance?For FHA loans originated before June 3, 2013, you might qualify for MIP removal when your loan balance reaches 78 percent LTV. For newer loans, you must refinance into a conventional loan with no PMI once you have 20 percent equity.
Can you get rid of MIP on an FHA loan without refinancing?FHA MIP removal without refinancing is only possible in certain instances, such as loans originated before 2013 or with at least 10% down payment. Otherwise, you must refinance out of your FHA loan to eliminate MIP.
Are there lenders that specialize in FHA-to-conventional refinances?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. Speak with a loan officer to explore your options.
Can you take cash out when you do a mortgage insurance elimination refi?Yes, a conventional cash-out refinance allows you to take out up to 80 percent of the value of your home, while also avoiding PMI. An FHA cash-out refinance also allows 80 percent LTV, but you will still pay MIP.
How can I get rid of PMI without 20 percent down?To remove PMI or MIP on an existing loan, refinance once your home reaches 20 percent equity. For a new loan type, consider options like piggyback loans, lender-paid mortgage insurance, or specialized programs without PMI.
Is paying PMI or MIP worth it?Yes, mortgage insurance allows you to buy a home with a smaller down payment and more lenient credit requirements. You can refinance to remove PMI or MIP once you have 20 percent equity.
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 mortgage 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.
Authored By: Tim Lucas The Mortgage Reports EditorTim Lucas spent 11 years in the mortgage industry before moving into the world of digital media. He's helped thousands of families buy and refinance real estate at banks and mortgage companies and now continues that mission through industry-leading content. Tim has been featured in national publications such as Time, U.S. News and World Report, MSN, Scotsman Guide, and more.
Updated By: Ryan Tronier The Mortgage Reports EditorRyan Tronier is a personal finance writer and editor. His work has been published on NBC, ABC, USATODAY, Yahoo Finance, MSN Money, and more. Ryan is the former managing editor of the finance website Sapling, as well as the former personal finance editor at Slickdeals.
Reviewed By: Paul Centopani The Mortgage Reports EditorPaul Centopani is a writer and editor who started covering the lending and housing markets in 2018. Previous to joining The Mortgage Reports, he was a reporter for National Mortgage News. Paul grew up in Connecticut, graduated from Binghamton University and now lives in Chicago after a decade in New York and the D.C. area.