When and How to Cancel FHA Monthly Mortgage Insurance (MIP)

If buying a home with an FHA loan, or if you have a FHA mortgage now, it’s important you understand WHEN you can get rid of or cancel the FHA monthly mortgage insurance premium (MIP) and then know HOW to cancel the FHA mortgage insurance.

Fortunately, FHA mortgage insurance is not permanent if you secured your loan before June 3rd, 2013…..so there is hope that your monthly mortgage  payment will one day be significantly reduced.

Also, if you are planning to buy a home using an FHA mortgage, you may want to re-consider or at least compare buying with Conventional financing using Private Mortgage Insurance (PMI).  A much better alternative.

Update 1/31/2013 ==> FHA just announced that borrowers who secure FHA financing after June 3, 2013 will be stuck with their monthly paid mortgage insurance premium (MIP) forever.  Read the changes MIP is changing again!

click here ==> FHA vs Conventional Loan Comparison & Rate Quote

When Can I Cancel and Get Rid of FHA Mortgage Insurance Premium?

FHA differentiates between a 30 year and 15 year fixed loan as to  when you can cancel your FHA monthly(annual) mortgage insurance premium.  if you secure your FHA loan after June 3rd, 2013 …..never!

  • 30 Year Loan Term – must pay the monthly (annual) 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.
  • 15 Year Loan Term – there is NO requirement that MIP be paid for 60 months but the LTV must be 78%.  LTV is based on paying the loan balance down, not current appraised value of the home.

When Will My Loan Balance Get to 78% LTV?

Don’t forget, you cannot get an appraisal to determine the LTV.  There is no set number of months it will take because it varies slightly based on the interest rate rate and size of the down payment, but for those who have a 30 year mortgage and put 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.  Remember, FHA does not require 15 year loans to keep the annual MIP for a minimum of 60 months.

Little known fact:  Mortgages with terms 15 years and less, with 90% LTV or lower, do not have to pay monthly FHA mortgage insurance……ever!

How to Remove or Cancel FHA Mortgage Insurance Quicker

It is possible to eliminate or get rid of the FHA mortgage insurance premium quicker if you make extra payments to the principle loan balance, but only after 60 months have passed.  FHA goes off the scheduled amortization schedule to determine when you will reach 78% LTV up until 60 months.

===> Refinance into a Conventional loan! – With homes appreciating, even if you don’t have 20% equity, we have a way to avoid paying costly monthly paid PMI (Private Mortgage Insurance).

===> Refinance into a VA Loan! – If you have VA loan eligibility, you could refinance into a VA loan and avoid paying monthly mortgage insurance.  A VA loan requires no monthly mortgage insurance and we can go up to 100% LTV on a VA refinance….and even do cash out!

Get a ==> Refinance-Purchase Rate Quote

Can I Cancel FHA Mortgage Insurance if My Home Upside Down in Value?

Ahhhhh….The million dollar question.  Yes you can!  If you meet the criteria I mentioned above for either the 30 or 15 year loan term, you can eliminate or cancel the FHA monthly mortgage insurance premium if your home is upside down in value.

Who Will Cancel My FHA Monthly Mortgage Insurance?

This is the easy part….FHA automatically drops the monthly (annual) mortgage insurance premium 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, if I were you, I would contact your servicing bank to make sure they are aware of  your projected date for your MIP removal is.

Quit wasting money on expensive FHA mortgage insurance.  ===> Contact me to discuss your options and start saving money.

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