An FHA loan sounded like a good idea at the time.
But now that you’re paying high mortgage insurance premiums, month after month and year after year, you might not be so sure. In fact, someone with a $250,000 FHA loan can expect to pay about $30,000 in mortgage insurance premiums over the life of the loan.
The good news is you can cancel your FHA mortgage insurance and you can start today.Check today's refinance loan rates and see if you can cancel your FHA mortgage insurance (May 21st, 2022)
There are two methods for removing your FHA mortgage insurance, commonly known as FHA MIP.
Option #1: Check your loan balance
You can request the cancellation of your FHA mortgage insurance when you meet certain requirements.
- The mortgage loan is in good standing
- The loan was opened prior to June 3, 2013
- You’ve paid your loan for 5 years if you have a 30-year loan. If you have a 15-year loan, there’s no 5-year minimum.
- Your loan balance is at or below 78% of the last FHA-appraised value, usually the original purchase price.
If you bought a house with an FHA loan some years back, you may be eligible to cancel your FHA PMI today. This option is attractive because it won’t require you to get a new mortgage. If your loan balance is 78% of your original purchase price, and you’ve been paying FHA PMI for 5 years, your lender or service must cancel your mortgage insurance today — by law.
While a low mortgage balance is a sure-fire way to cancel FHA mortgage insurance, it can take a while to get there. On a 30-year fixed FHA loan, it will take you about ten years to pay your loan down to 78% of the original purchase price. If you’re not quite there, continue making payments for a few more years, or make a one-time principal payment.
Borrowers who have hit the magical 78% loan-to-value ratio can potentially start saving hundreds on their monthly payments and keep their existing FHA loan and interest rate intact.Complete a short online form here to start your refinance process today (May 21st, 2022)
Option #2: Refinance out of it
Canceling FHA mortgage insurance is also possible by refinancing into a conventional loan. Refinancing to a conventional mortgage is often the quickest and most cost-effective way to do it — especially if mortgage rates have dropped since your original loan. And it can be the only way to do it if you opened your FHA loan on or after June 3, 2013, when FHA mortgage insurance became non-cancellable.
With today’s rising home values, homeowners might be surprised how much equity they have. With a refinance, you can use your home’s current appraised value (from a new appraisal) rather than the original purchase price.
Replace FHA mortgage insurance with conventional PMI
Conventional private mortgage insurance, or PMI, has to be paid for just two years, then is cancellable. Converting your FHA mortgage insurance to conventional PMI is a great strategy to reduce your overall cost. Conventional PMI is usually much cheaper than FHA mortgage insurance, and you can cancel it much more easily.
You can often refinance into a conventional loan with as little as 5% home equity.
When your new conventional loan balance reaches 78% of the home’s value, you can cancel conventional PMI. Some lenders and servicers will even let you cancel when you reach 80% of your home’s current value.
In as little as two years, you could be rid of mortgage insurance forever. Compare that with a minimum of five years for FHA, and a maximum of 30 years if your FHA loan was opened after June 3, 2013.
Get rid of FHA mortgage insurance today with a loan that doesn’t require PMI
If you have about 20% home equity based on today’s value, you can cancel your FHA mortgage insurance using a conventional refinance, often within 30 days, and you can start here today by completing a short online form.
You might have more equity than you think. Some areas of the country like Phoenix and Las Vegas have seen 20% to 30% appreciation over the past few years. Use your new-found equity to discontinue your FHA mortgage insurance. Refinance into a new loan that does not require mortgage insurance of any kind, and do it immediately.
For instance, if you purchased your home for an original value of $200,000 with an FHA loan, and the home is now worth $250,000, there’s a good chance you can remove your FHA mortgage insurance now. There’s no sense in making bigger monthly payments that will cost you thousands over the loan term.
Canceling FHA MIP with a VA Loan
If you have military experience, you might qualify for a VA refinance. A VA loan doesn’t require monthly mortgage insurance, which can significantly reduce your monthly mortgage payment.
Another great benefit is you don’t need equity in your home to refinance your home loan. In some cases, you can be qualified for a loan at up to 100% of your home’s current value.Click here to check today's VA rates (May 21st, 2022)
Making a plan to get rid of FHA mortgage insurance is a great financial decision
When you’re you’re making a home purchase, you’re mainly focused on getting into a place where you can set down roots and build a solid future. The down payment can be a big hurdle so high FHA PMI costs can be a worthwhile trade-off.
But now you’re settled in, it’s time to think about getting rid of FHA mortgage insurance. These high monthly PMI payment costs could and should be going into savings, a child’s college fund, or toward loan principal.
Don’t delay. Even if you’re not able to cancel your mortgage insurance now, make a plan for how you’re going to do it.
Ten or twenty years down the road, you’ll be glad you did.Check today's rates and start your MIP-eliminating refinance here (May 21st, 2022)
Check today’s rates on FHA MIP cancellation loans
Rates have been hovering around 11-month lows recently. Homeowners who want to eliminate their FHA mortgage insurance should check rates and lock in a refinance before rates rise.
It’s possible to keep a similar rate or even drop your rate when you refinance out of FHA. You could save a lot of money every month in interest and mortgage insurance.Click here to get started (May 21st, 2022)