When you get an FHA loan, the home buyer pays a mortgage insurance premium at the time of closing. This initial premium is the called the upfront mortgage insurance premium (also known as UFMIP or MIP).
The FHA reduces a borrower’s eligible refund amount by two percentage points for each month after the initial FHA loan closing date. This is why it’s best to refinance sooner rather than later with FHA loans.
For example, let’s say you bought a home with a purchase price $250,000 about 15 months ago using an FHA-insured loan and paid an upfront mortgage insurance premium of $4,375 (1.75% x base loan amount). If you refinance to a new mortgage loan now, you may be eligible to receive a 52% refund or $2,275. If you wait an additional 5 months to refinance, then the eligible refund amount drops to $1,838.
FHA MIP Refund Chart 2021
|Months after closing||MIP refund||Months after closing||MIP refund||Months after closing||MIP refund|
How to calculate your FHA MIP refund
To calculate your MIP amount for your new FHA refinance loan, you’ll need to determine the following figures:
- Your original MIP amount. You can find this listed on your original loan documents.
- The number of months after your closing date.
- The eligible refund percentage. See chart above.
Next, multiple your original upfront MIP amount by the eligible refund percentage to determine your total refund amount. For example, if your original MIP amount was $2,500 on a loan that closed 10 months ago, then your eligible refund percentage is 62%. Your MIP refund amount is $1,550 ($2,500 x 0.62).
(Original MIP amount) x (Refund %) = FHA MIP refund amountFHA MIP Refund Calculation
Your refund amount is only part of the story, though. When you refinance your current FHA loan to a new mortgage and there is a refund due, the refund amount is applied to the new upfront mortgage insurance premium for your new FHA refinance loan.
How to calculate your new FHA loan MIP amount
To calculate your MIP amount for your new FHA refinance loan, you’ll need to determine following figures:
- Your new UFMIP amount. This is calculated by multiplying your base loan amount by 1.75% (all FHA mortgages charge this amount).
- Your MIP refund amount. See above section for how to calculate.
Next, subtract your MIP refund amount from your new UFMIP amount. This amount is the total UFMIP you owe on your new refinance loan.
(MIP refund amount) – (New UFMIP amount) = New loan UFMIP amountNew FHA UFMIP calculation
For example, if your new refinance loan is $200,000, then your new UFMIP amount is $3,500 ($200,000 x 0.175). Now, let’s say your MIP refund amount is $1,800. That means, you’ll only have to pay $1,700 UFMIP towards your new refinance loan ($3,500 – $1,800 = $1,700).
Eligibility requirements for FHA MIP refunds
The FHA has specific eligibility requirements for MIP refunds both for your original FHA loan and your new FHA refinance loan. To be eligible, your current FHA loan must:
- Have closed less than three years ago
- Be up-to-date on all mortgage payments with no serious delinquencies
- Not have entered foreclosure
- Not be an assumed FHA mortgage
Other things to note:
- You must refinance into another FHA loan to receive an MIP refund
- MIP refunds will be applied to the UFMIP on the new FHA refinance loan
- For FHA streamline refinances, MIP refunds are available after the 7-month waiting period required for these loans
- Your refinance loan must close by the end of the 36th month after the current FHA loan was opened
Can I get the FHA MIP refund in cash?
FHA MIP refunds are not eligible as cash refunds. The HUD underwriting guidelines states “If the borrower is refinancing his/her current FHA loan to another FHA loan within 3 years, a refund credit may be applied to reduce the amount of the UFMIP paid on the refinanced loan.”
Who do I contact with questions regarding my MIP refund?
The U.S. Department of Housing and Urban Development (HUD) is the administrator of FHA loans. HUD has created a Mortgage Insurance Premium Refund Support Service Center where you can ask questions about mortgage insurance refunds. You can contact HUD with your questions in one of the following ways:
Upfront mortgage insurance premiums vs. annual insurance premiums
In addition to upfront mortgage insurance premiums, all FHA loans charge an annual insurance premium. Each premium charges a different percentage on the base loan amount and has specific requirements.
- Upfront mortgage insurance premiums (UFMIP) is a one-time charge due at closing. All loan types are charged 1.75% on the base loan amount.
- Annual insurance premiums in most cases are paid over the life of the loan. The percentage you’ll be charged is dependent on the base loan amount, your down payment amount, and the loan term. (See a table of FHA insurance premiums.)
Apply for an FHA refinance before your refund expires
With current interest rates at historic lows, many homeowners who purchased a home less than three years ago bought when rates were higher than what is available now. That means it’s likely that a refinance could reduce your monthly payment.
If this is you, it may be good to refinance your current FHA loan into a new FHA refinance loan now before your refund expires.