Refinance to Get Rid of FHA MIP – Eliminate FHA Mortgage Insurance
Refinancing your mortgage to eliminate your FHA mortgage insurance can save you a lot of money (both on your monthly payment and long-term over the life of the loan). FHA MIP (mortgage insurance premiums) is required on all FHA loans, and is rather costly.
Below is an overview of all of your options for removing FHA mortgage insurance.
If you would like to learn how to remove PMI on conventional or VA loans, click here.
Once you have established sufficient equity you may want to consider refinancing from FHA to a conventional mortgage. If your loan balance is below 80% of your equity (your loan-to-value ratio), you will automatically not have to pay mortgage insurance on a conventional home loan.
Find out how and when you can drop your FHA mortgage insurance premiums. Many people ask “can I get rid of my FHA mortgage insurance early?”. In some situations (which we can advise you if you are eligible), you may be able to accomplish this early and without refinancing. For most homeowners, however, the best (and often the only) option to eliminate their mortgage insurance payments is to refinance from a FHA loan to a conventional mortgage. If you are likely to have established 20% equity (so an 80% LTV) you should considering switching to a conventional loan.
Refinance FHA Loan to Remove MIP
Often the only option (as well as the most efficient and practical method), is to remove MIP through refinancing. Keep in mind, conventional loans almost always offer better loan terms than do FHA loans. Therefore, you will likely save additional money by being offered a better rate and better loan in general.
Our refinancing process is simple and can save you a lot of money. You can eliminate costly MIP, and also reduce your monthly mortgage payment with a lower interest rate. Both conventional and FHA rates have stayed low in recent years, however, they are projected to rise more over the course of 2019.
How much does FHA mortgage insurance premiums cost?
There are two different types of mortgage insurance. You pay upfront MIP and monthly MIP.
Upfront MIP – You pay this premium upfront and at closing, but not as cash out of pocket. The amount will be added to your loan balance (it does not affect or change your loan-to-value ratios though). Upfront MIP costs 1.75% of the loan amount. A $200,000 loan amount would require $3,500 to be added to the loan balance. This is a one time upfront payment.
Annual MIP – This is technically called “HUD Escrow”, but is more commonly known as Annual MIP. The amount is actually paid monthly (the annual MIP is broken into 12 payments). The amount that you pay is determined by when your FHA loan was issued. As of 2015, the percentage is 0.85%. In case you are unaware of what you are paying, visit this page to see the history of FHA mortgage insurance premium percentages.
When does MIP go away?
If left to go away on it’s own, MIP will drop off after your mortgage reaches below a 78% LTV, and after 60 months of perfect payment history. If a property maintained the exact same value (no appreciation or depreciation), a 30 year fixed FHA mortgage will take just over 10 years to achieve a 78% LTV (assuming only the required 3.5% down payment was placed).
A loan specialist can assist you in finding out if you are eligible to receive a MIP refund. This is a complex matter and is best to discuss your current loan and payment history with a representative who can check your eligibility.