Cancel FHA Mortgage Insurance
Canceling Mortgage Insurance on an FHA Loan before June 3, 2013
It is possible to cancel your FHA mortgage insurance premium (MIP) if you were assigned an FHA loan before June 3, 2013. To qualify to cancel your FHA mortgage insurance, the loan to value (LTV) must be 78% or less and you have paid on your FHA loan mortgage insurance for 5 years now. FHA calculates the loan to value as your current loan balance divided by FHA’s last known value of the home (not its current appraised value*).
Loan to Value (LTV) Calculation
Loan Balance: $350,000
Home Value: $450,000
Loan to Value: $350,000 divided by $450,000 = 77.77%
*If the current appraised value of your home is favorable in calculating your loan to value calculation, you may want to consider refinancing your FHA loan to a conventional mortgage.
Please see our helpful refinance tips below and fill out the contact information request below to find out if you are eligible to save money and explore your options to remove your mortgage insurance given your specific loan situation.
HUD Revision of Federal Housing Administration (FHA) policies concerning cancellation of the annual Mortgage Insurance Premium (MIP) and increase to the annual MIP: HUD letter dated January 31, 2013
Canceling Mortgage Insurance on an FHA Loan after June 3, 2013
Question: If I purchased a home after June 3, 2013 with an FHA Loan, could I remove or cancel mortgage insurance?
For FHA loans obtained after June 3, 2013, the only way to cancel or to get rid of an FHA loan PMI is to refinance your existing FHA loan into a conventional loan. Unfortunately FHA loans after June 3, 2013 carry the mortgage insurance for the life of the loan.
Your Refinance Option to Cancel FHA Mortgage Insurance
If you want to get rid of your FHA mortgage insurance, a refinance might be one of your better options.
As you look into your refinance options, we recommend that you ask the lender a few things such as:
- What are the closing costs and fees to refinance my FHA loan?
- Will my loan balance stay about the same or will it increase? By how much?
- What is the Interest Rate? What is the Annual Percentage Rate (APR)? APR reflects the true cost of obtaining a loan.
- What is my new monthly payment? Does it include property taxes and insurance?
- What are the advantages and disadvantages of getting another 30 year mortgage? How about a 20 year mortgage or 15 year mortgage?
- Is there a prepayment penalty on the new loan?
- At what value does my home need to appraise for to successfully refinance and remove my mortgage insurance?
- What type of income and credit requirements do you need to qualify for a refinance?
Before you refinance, please answer some of the questions below:
- How long do I plan to stay in my home?
- What is more important – paying down my mortgage as soon as possible, or having the lowest monthly payment possible?
- How long will it take me to break even when I consider the costs of refinancing vs. any monthly cash savings from a refinance due to a lower rate or a longer term (30 year fixed).
Do you need professional advice to discuss your options in removing or canceling your mortgage insurance?
We are a team of real estate professionals who are dedicated to serving the needs of our clients. Please be sure to fill out the contact information request to ensure an effective initial consultation that is beneficial to you. We are here to get your questions answered.