If you currently have a FHA Mortgage, and you are refinancing, either with a full “application” FHA Mortgage, or with a FHA Streamline Refinance which doesn’t have as much documentation, you might be eligible for a refund of part of your FHA PMI mortgage insurance.
ALL mortgages that have less than a 20 percent down payment carry some sort of mortgage insurance. This is the insurance that probably saved our Nation in the past few years when so many folks went into foreclosure.
While it doesn’t pay the bank the FULL amount that it is owed – it will generally pay at least 20% of the balance, which gives a bank the opportunity to pay legal fees, maybe fix it up, etc. avoiding a complete loss. It does YOU the consumer no real good – it’s for the Bank’s benefit, and we normally call that type of mortgage insurance PMI.
FHA has a rate decrease coming to the FHA PMI rates effective January 26, 2015. With this .5% drop in the annual fee – many people are confused about what that’s going to do to their payments.
FHA PMI Refinance Refund
There are two types of FHA PMI Premiums charges on a loan. One cost is the Upfront fee – this premium is generally added to the loan amount. This is NOT the part of the FHA PMI fees that are changing on January 26, 2015.
The second “kind” of FHA PMI premiums charged, are included in with your monthly payments. THOSE are the fees that are going down by 1/2 a percent. That can be significant. For someone with an initial loan of $225,000, once we add the upfront FHA PMI fees, that means you borrowed $228,937. At today’s FHA PMI rate (before reduction) your MONTHLY FHA PMI fees would be $249.
This FHA PMI fee is also sometimes called the ANNUAL FHA MIP (Mortgage Insurance Premium) fee. With the NEW FHA PMI rates in January, 2015 – the monthly fees on this same $228,937 loan will go down to $156 a month. Now you see why this is a HUGE DEAL.
The only way for folks to see this savings will be to refinance into a new FHA Loan.
But what about that almost $4000 that you paid in upfront FHA PMI Fees?
The current upfront FHA PMI premium is equal to 1.75% of your loan amount. Most borrowers add that upfront fee to their mortgage. If you did that, and you borrowed $100,000 with a FHA Loan, your total loan amount is $101,750. If you refinance that loan, you could be eligible for a FHA PMI Refinance refund of that “extra” (unused) upfront premium you paid, as long as you refinance within 36 months.
You are only eligible for a refund of a portion of the refinance if you are refinancing from a FHA loan to another FHA loan. If you decide to refinance into a Conventional Loan (for instance) you will not get a refund. The refund is never paid in cash – it is typically applied to the upfront premium on the new FHA Loan.
When you refinance, however, you will miss a monthly Mortgage Payment – so that SHOULD be some extra cash in your pocket!
The Refund of your FHA PMI Fees/ an example from FHA
- Your original upfront FHA PMI Mortgage Insurance Premium on your FHA Loan was $2500
- Of that amount, the refund owed to you is $1,500
- If the FHA PMI Upfront fees on the new loan are $2,000
- Then you pay $500 on the new FHA PMI Upfront Mortgage Insurance Premium, because $1,500 of it credited to you with your refund.
If you took out your FHA Mortgage Loan MORE than 3 years ago, you are probably not eligible for a refund of your upfront FHA PMI premium, however, if you have questions about your specific situation, then you can check the special FHA “Refund Questions” site. You have six years to make a claim. For more information on claiming an FHA PMI refund contact HUD through their site: “Does HUD Owe You a Refund?”
If you’ve lived in your home for more than 36 months, you will not get any reduction in your upfront FHA PMI Premium… but mortgage interest rates have dropped, and you will still qualify for the reduced monthly FHA PMI fees.
MANY folks in North Carolina purchased a home within the last 3 years and they probably have a higher mortgage rate on their mortgage than what we currently offer! So… those folks will receive:
- A reduced monthly FHA PMI payment
- A reduced monthly payment with lower mortgage interest rates
- A reduced Upfront FHA PMI charged because of a refund of their initial premium.
It’s time to call us for a PERSONAL look at your FHA Loan, to figure out if a FHA Streamline Refinance makes sense for you! Not all people will save, but the ones that do… will save BIG TIME! Call Steve and Eleanor Thorne 919 649 5058