With the new FHA Streamline Refinance program – and the recent changes in the FHA PMI rates – we’ve had several people ask, “When Can I Cancel and Get Rid of FHA Mortgage Insurance Premium?” In other words, When Does FHA PMI Stop ?
The good news is that unlike the USDA Loan Program (that also saw recent changes to it’s PMI rates) you actually CAN “get rid of FHA PMI!” 🙂
You have two types of Mortgage Insurance (PMI) with FHA. If you took your loan out prior to 2004, the Upfront FHA PMI Premium charged could be partially rebated if you refinanced or sold within 5 year of getting the home. That changed, as the FHA Insurance Fund started going under water, and the Upfront FHA PMI Insurance Premium is no longer refunded. So if you get a mortgage in June, you are charged an initial premium of 1.75% of your loan amount, and if you refinance that loan 2 years later to another FHA Home Loan – you will pay another UpFront Premium, and none of the 1.75% you paid this year will be refunded.
The “Monthly” charge is what you can stop paying. This charge is “technically” called FHA MIP (mortgage insurance premium) but since it’s just kinda semantics – we refer to it all as FHA PMI.
For FHA Loans Taken Out PRIOR To June, 2013 FHA differentiates between a 30 year and 15 year fixed loan as to when you can cancel your FHA PMI :
- 30 Year Loan Term – must pay the monthly insurance premium for a minimum of 60 months (5 years) and the loan must reach 78% loan-to-value (LTV) as a result of paying the loan down (amortization). LTV is not determined by the new home value, it’s determined by the original sales price of the home. LAYMAN’S TERMS: If your original sales price was $100,000 – multiply that by 78%. You need to get your mortgage balance down to $78,000 before FHA will allow you to drop the PMI.
- 15 Year Loan Term – For Loans that closed prior to June, 2012 – there is NO requirement that FHA PMI / MIP be paid for 60 months if the LTV is below 78%. LTV is based on paying the loan balance down, you calculate this the same way you do for a 30 year mortgage. Remember, this is NOT based upon the current appraised value or the current tax value of the house.
For FHA Loans Taken Out AFTER June, 2013 –
- 30 Year Loan Term: You will pay FHA PMI / MIP for the life of the loan if you make less than a 10% down payment. As long as you have this FHA Mortgage – you will have FHA PMI on a monthly basis. If you make a 10% or more down payment, the Annual (monthly) FHA PMI charges will remain on the loan for 11 years, and you reach a 78% loan to value (as described above – meaning from the original mortgage balance).
- 15 Year Loan Term: You will pay FHA PMI / MIP for the life of the loan if you make less than a 10% down payment. This was a huge change in the guidelines. If you make a 10% or more down payment, the Annual (monthly) FHA PMI charges will remain on the loan for 11 years, and you reach a 78% loan to value (as described above – meaning from the original mortgage balance).
The FHA PMI Rates 2013 are different than they have been – so if you’ve been looking for a house for a while, check out the best FHA PMI Rates.
How Can I Determine When I Will Reach 78% LTV?
There is no set number of months it will take because it varies slightly based on the interest rate and size of the down payment. If you use Excel – you can easily find an amortization program that will tell you when your mortgage will be at the “sweet spot!” For a 30 year mortgage with 3.5% down, it will take between 9-10 years to get down to 78% LTV.
A 15 year fixed mortgage will pay down to 78% LTV between 2-2.5 years if you made a 10% down payment. Remember, FHA does not require 15 year loans to keep the annual MIP for a minimum of 60 months if you took your mortgage out prior to June 2013.
How to Remove or Cancel FHA PMI Quicker
Assuming you got your FHA Home Loan prior to June of 2013 – it’s possible to get rid of the FHA PMI payments quicker if you make extra payments, but you still have to wait the five years (60 payments) before it can be taken off if you have a 30 year mortgage.
Refinance -If you you think you have 20% equity in your home but don’t meet the 60 months or 78% LTV based on the original purchase price or appraisal criteria, it may be possible to refinance into a conventional loan. If you don’t have 20% equity, and have VA home loan eligibility, you could refinance into a VA loan. A VA loan requires no monthly mortgage insurance and we can go up to 100% LTV on a VA refinance. Unfortunately, even though it’s cheaper – you can not refinance from a FHA home loan to a USDA home loan in North Carolina.
Can I Cancel FHA PMI if My Home Upside Down in Value?
It might not seem logical – but if you’ve been in your home for 5 years… and you’ve paid it down based upon the ORIGINAL sales price to the 78% mark, you can cancel the annual FHA PMI you are charged on a monthly basis… even if you’re home is upside down in value.
How Do I Cancel My FHA PMI?
This is the easy part….FHA automatically drops the monthly FHA PMI based on the amortization schedule. You don’t have to order an appraisal and technically, you don’t even have to request the removal. However, we suggest contacting your servicing bank to make sure they are aware of your projected date for your PMI removal!
Are you ready to do a FHA Streamline Refinance? We offer the cheapest mortgage rates available! If you have more questions about When Does FHA PMI Stop – call Steve Thorne 919 649 5058
If I refinance my FHA loan does my MIP timeline restart?
Yes – when you refinance the MIP restarts. FHA announced in late December that with NEW loans issued later this year (Feb?) they are going to leave the MIP on for the life of the loan.
I originally purchased my home 14 years ago and have refinanced a few times. I’m currently in an FHA and will be doing a streamlined refinance. My question is… What is the “Value” in the LTV calculation. My original purchase price 14 years ago, or my appraised value on my previous refinance? My original purchase price was $135K. After years of upgrades and renovations my last appraisal 31/2 years ago was $220K. The reason for the question is that I’d like to make sure I’m at 78% LTV once I pay my 5 years worth of MIP, so I can remove it.
FHA is going to do away with the ability to have the MIP removed. You need to talk to a Loan Officer ASAP. You can call us at 919 649 5058
I closed the loan in Nov 2012 and my loan amount was $650k. For the same home the builder is now selling for $750k. I have FHA 30 yr fixed and is there an option to remove PMI based on new home value before 5 yrs?
No – I do not think there is a way to remove the PMI, even if the values have gone up in your area with less than 5 years. The only other option would be to refinance after you’ve owned the property for 12 months to a Conventional Loan.
I have a similar question to another one above. Some people have told me the value that is looked at is your original purchase price of the home, but others have told me the value is based on your most recent refinance. I bought my home in 2006 for 260k, but I refinanced in 2010 and it was appraised at 240K. Which number is correct? I am doing another FHA streamline refinance right now so I will beat the April 2 date of having to keep my MIP permanant.
I have a FHA loan that I paid down to 78% LTV, but I am about 15 months away from the 5 year mark since I purchased the home, Is there anyway possible to have the PMI removed ?
I originally purchased my home for $206k in 2006. I last refinanced in May 2010. My LTV is below 78% (we owe 163k). If we had the home appraised, it would probably only come in at 140k tops. I want to cancel my pmi now. Is the 5 year rule based on the original purchase date or from the last refinance?
Sorry…my math was wrong. My LTV is below 80%, not 78%.
LTV is not determined by the new home value, it’s determined by the original sales price of the home. SO you take the current balance and divide that by the original sales price to come up with the 78%. You’ve asked a great 2 part question though… does the 60 payment trigger off of the ORIGINAL sales price / FHA loan or the NEWEST FHA refinance date. Our underwriters feel that you will be charged based upon the NEWEST refinance date… HOWEVER… if your original loan was with Wells Fargo (for instance) and you refinanced with Wells Fargo, they MIGHT consider it from the original loan date. Because of that, I suggest that you contact your current mortgage company.
At the actual 60 payment mark, you can have it removed – but not before that.
The original Sales Price is what we’ve been told is the “number.” However, we also believe that the 60 months of payments (5 years) is based upon the most recent Refinance. So if you refi’d in 2010 – see what this does to your FHA PMI. Would it be better to keep your current mortgage… not have the higher FHA PMI for the next 5 years, and have the FHA PMI drop off in 2015?? You’ll need to do the math.
I refinanced my fha loan in September 2011 and I have heard that as of April 1, 2013 even existing fha loans will not have the ability to cancel PMI for 11 years, regardless of the LTV amount. Is that true?
No – the date for THAT FHA PMI change is June. After June FHA’s PMI will stay on the loan for the life of the loan. The April Change was just a hike in the FHA PMI rate.
Thank you for your response!
I am purchasing a foreclosure ( 69,900 I wanted to NOT pay mpi, can I finance for 15 years and avoid paying this Ive been told the mpi is mandatory 93.00 monthly , just don’t know what to do and getting a rehab loan to do it for 12,
000 added to the loan making it 80,000, don’t trust the mortgage broker.
If I have an FHA loan on which I currently do not pay monthly MI on, is there a way that I can refinance into another FHA without adding on MI again? I was maybe looking into a streamline refinance to do this, but wanted your opinion on this.
Roy – we are not aware of a FHA loan that doesn’t have any monthly PMI, our guess is that you have it, and don’t realize it’s in your payment! If you will call us, we can figure it out for you. With FHA PMI rates dropping this month, it’s definitely worth the conversation! We just saved a guy with a 4.5% FHA loan over $200 a month!
In need of a second opinion! We locked in with our FHA loan prior to the June 2013 changes that require PMI for the life of the loan. Is it worth doing an FHA streamline refi since we don’t yet have the 10% equity required and will incur PMI for the life of the loan? Are we able to refi again or refi out of this streamline loan into a conventional loan, or are there mandatory waiting periods like the minimum 5 years of PMI on our current loan?
Francesca – our site got hacked. I think I already answered this, so sorry if I’m repeating myself.
There’s a six month waiting period. Obviously you are beyond that. You can always refinance to a Conventional Loan, and it is not uncommon for someone to refinance a mortgage multiple times as rates fall. They were lower just this week- so I would call. Let us run the numbers for you, we will be glad to give you comparisons. FHA PMI rates went lower this year, so that’s good news!
I purchased my home in early 2010 using an FHA loan. At the time the appraised value was $115,000 and I bought the home for $99,900. At this point I have paid 60 months and based on my calculations I should be around 75% (owe about 86,000 and some change), however when I contact the current mortgage holder, they seem to think I am at 78.20% and just outside of the PMI removal.
I went back and looked at a “Summary” they sent me where they “estimated” my property to be worth $111,000 and based off a few calculations I believe they are using that number for my LTV and PMI removal number instead of the original appraised value.
When I contacted them they were very confused and I had to speak to a manager who only asked me to fill out an early PMI removal form which says I agree to an appraisal (which I did not fill out because I don’t agree to pay for one and I also believe the value has potentially dropped since then and would be detrimental to obtain).
At this point, my best option seems to be to simply pay the last tiny .30/.20 percentage and have it automatically drop, but I am frustrated that they are essentially able to “make up” their own estimated value and not using my Original appraised value (which I still have digital copies of). I imagine this is partially because the loan was sold from 1 small bank to a large bank, to yet another mid sized bank and they have probably “lost” the appraisal….? What recourse do I have at this point? Any thoughts?
I don’t know what the terms of your note are. My guess is that they are following the strict terms that are in that Instrument. I’m sorry they don’t know much about the process, but you should be able to verify it by looking at your note
HOW CAN I TELL IF i AM PAYING THE MIP ON MY FHA LOAN IF IT IS IN THE PAYMENT. WHEN I CALLED MY MORTGAGE COMPANY THE SAID I AM NOT PAYING IT. BUT I DON’ T BELEIVE THEM.
Becky – if you have your closing statement, or most any other document from closing, it will have your FHA CASE Number. You can call HUD at 1-800-697-6967 to see if they can direct you, or give you the information you need. That’s my best suggestion, since you don’t trust your lender. Good Luck.
I own a home purchased in 2010 and this November will be 5 years. Original price of home was 240k I owe 209k currently. The price of the house just appraised at 365k.
Do I qualify for the Mortgage insurance to be removed with the new price of the home? Some loan officers are saying that I can, but your site says otherwise.
Thank you very much for your reply,
Adam, FHA changed the way it charged MIP (FHA’s PMI) twice in 2010. If your loan was taken out after October 4, 2010, you had a slightly lower rate – and you can have your PMI cancelled. However, according to the Mortgagee Letters of that time, they are going off of the original Sales Price. You can view Mortgagee Letter 2000-38 and 2000-46 for confirmation.
I would suggest that you contact your “Servicer” for the most accurate information, since I have no way of knowing when your case number was processed through FHA. The wording regarding your ability to remove FHA Mortgage Insurance will be contained in your closing documents. If you can NOT remove the insurance, I would suggest refinancing to a Conventional Loan. If you are in NC, we will be glad to give you a quote of your payments and options.
THANKS for asking this question, so many people are confused because FHA has changed their policies so many times… additionally, many loan officers don’t do that many FHA loans, and because of that, don’t realize the small nuances in the program.
I purchased my home in November 2012 through FHA and have calculated how much extra I need to pay down the loan to be at 78% LTV by 5 years (Dec 2017). My kid is in UCLA so I took out a 2nd Mtg to help defray costs. Now I’m concerned because various web sites say I can’t remove mortgage insurance because I have lowered my equity with the 2nd Mtg. Am I confusing private mortgage insurance (PMI) with FHA’s MIP? I think I’m needlessly concerned because your article states that even if you’re upside down on the value, FHA will still remove the MIP as long as I’ve lived there 5 years and have 78% LTV based on original sales price (and am not late on payments in final 12 months). Can I start sleeping through the night again? Thx!
George I think you should call FHA at…. Telephone: (800) CALL-FHA (225-5342)
Persons with hearing or speech impairments may access this number via TTY by calling the Federal Information Relay Service at (800) 877-8339.
They will give you the best information for your specific situation. Be sure t have your FHA Case Number available when you call. It’s found on your payment stub, and your HUD1 closing statement.
So I purchased my house in June 8 2012 for 280,000.00 and I now owe 78% of it which is 218,400.00. However, I haven’t reached the 5 year mark. I have read that if I purchased my home on or before June 2012 I’m not required to wait the 5 year mark. Is this true or am I stuck paying an additional 6,000 for premium insurance that I don’t need!
You should call the FHA Hotline – be sure to have your FHA Case number available. The rules changed so many times during that time period and as I understand it, it really depends on when FHA endorsed your loan. That’s something you and I don’t know. Their number is 1-800-697-6967
I bought my home land contract in May 2010 for $83,000, appraised then at $88,000. I refinanced with FHA loan in March 2012 for $72,000. When I went FHA my house appraisal was $95,000. I have 8 more months before 60 months requirement is meet. What figure would I use for LTV figure to know if I have meet 78%. Thanks
Heather they will use the $72,000 figure I think – but that is something that is going to be an Underwriter discretion. Please talk to a Loan Officer, you probably need to contact the folks that you are making your payments to.
I did a FHA streamline refinance in March 2010. I didn’t have to pay for an appraisal but BOA did do an appraisal. Since I did not pay for it I was not given how much my home appraised for at the time and was given $166,887.00 loan. My mortgage loan has just been transferred to a new lender. I was told I would have to fax their escrow department to find out what that magical number I need to reach to be below the 78% mark. I currently owe $137,999.00. The guy I talked to today he had my mortgage at 78.86% but he couldn’t tell me the number I needed to be at to be below the 78% that I would need to fax the Escrow company. The Escrow company will not take phone calls so I must pay to fax them. Before I spend the money to fax would you be able to tell me if the FHA MIP goes by the starting loan amount which in my case would be $166,887.00 or by the appraised value when they refinanced my home?
We bought our home in 2011 with a 30 year FHA mortgage. In 2013 we did a streamline refinance with the same lender in advance of the change in FHA MIP rules. This was another 30 year FHA loan, which we closed at the end of February 2013. No re-appraisal was done and they used the original appraisal for the valuation. 60 months based on February 2013 will be March 2018 for the MIP drop-off. Based on the original closing date we will have MIP for 72 months as of our June 1 mortgage payment (on two different FHA loans). Our lender is claiming that we can now drop MIP, though I suspect this is actually another refinance. The original appraisal was $390K and the current loan balance is about $315,300. 78% LTV according to the original appraisal is $304,200. My understanding of FHA MIP rules before the 2013 rules change is that you need (a) 60 months of MIP paid, AND (b) 78% LTV. This is why I suspect this is an offer to refinance and not just dropping MIP. I think our MIP will drop off in March 2018 anyway at the 60 month mark. Am I correct?
Tom, based upon what you have presented, you are correct. You would need to refinance to a different mortgage to eliminate the MIP. You might be able to refinance to a Conventional Mortgage and eliminate it all together with a 20% LTV. Rates are lower this week, but I doubt they are as low as your 2013 mortgage.