What FHA MIP is
FHA loans carry a mortgage insurance premium, or MIP. There's usually an upfront premium at closing and an annual premium that's split into your monthly payment. It protects the lender, and it lets many buyers get an FHA loan with a smaller down payment.
Unlike private mortgage insurance on a conventional loan, FHA MIP generally doesn't drop off just because you reach a certain amount of equity.
When MIP ends on its own
For FHA loans with case numbers assigned after June 2013, the rules generally depend on your original down payment:
- 10% or more down: annual MIP usually ends after 11 years.
- Less than 10% down: annual MIP usually lasts the life of the loan.
- Older FHA loans may follow different rules. Your servicer can confirm yours.
Your options to remove it
- Refinance into a conventional loan at 80% loan-to-value or less, so no PMI applies.
- Wait out the 11 years, if you put 10% or more down.
- Pay off the loan, for example when you sell the home.
Check your equity
Divide what you owe by what your home is worth today. If the result is 80% or less, you have about 20% equity. Home values in many areas have grown, so a loan that started at 96.5% may be much lower now.
The value that counts is the one the lender uses, which may come from an appraisal.
Refinancing to conventional
Hypothetical example: your home is worth $400,000 and you owe $300,000, so you're at 75% LTV. A conventional refinance at that level wouldn't need PMI. If your FHA MIP were about $138 a month, removing it could save that amount, before any change in your rate.
Example only; your MIP, rate and savings depend on your loan. APR may differ; example only. Rates change daily.
Compare the whole payment
Dropping MIP is only part of the picture. Compare your new rate and payment with your current one. If today's rates are higher than your FHA rate, the MIP savings may or may not outweigh the rate change. A loan consultant can show both side by side.
CapCenter offers an FHA to conventional refinance for homeowners with about 20% equity, with ZERO Closing Costs (restrictions apply; see Offer details).
Other FHA refinance options
An FHA Streamline refinance can lower the rate on an existing FHA loan, often without a new appraisal. It keeps you in an FHA loan, so MIP stays. It may still make sense if your goal is a lower rate rather than removing mortgage insurance.
