Can you remove mortgage insurance from an FHA loan?

Quick insights

• Monthly mortgage insurance premiums (MMIP) are required on all FHA loans, regardless of down payment; this is different from private mortgage insurance (PMI), required on conventional loans with low down payments.
• Monthly or annual MIP may discontinue automatically after a certain amount of time .
• Depending on when it was issued, an FHA loan may not qualify for automatic MIP removal, so you may want to consider refinancingrefinance-hl000061 to a conventional mortgage.

If you are exploring your loan options or already have an FHA loan, you may be wondering when MMIP goes away or how to remove MMIP from an FHA loan. That’s actually MIP for this type of loan. In this article, we’ll describe how MIP on federal loans works, including how this can impact monthly mortgage payments and how MIP may be removed from your FHA loan.

The basics of FHA loans

The Federal Housing Administration (FHA) offers specific loans for first-time homebuyers to help make owning property more accessible. When compared to conventional mortgages, FHA loans tend to have lower down payment requirements (as low as 3.5%) and more lenient credit criteria. FHA loans also require that borrowers pay mortgage insurance premiums (MIPs) up front and throughout the course of the loan’s repayment.

Know the difference: MIP and PMI

With a conventional mortgage, a smaller down payment may result in the added monthly cost of private mortgage insurance (PMI). Because of its similarity to the MIP with FHA loans, people may use PMI and MIP interchangeably, but they technically relate to different loan types. So, if you find yourself searching “how to get rid of PMI on an FHA loan,” or “when does PMI go away on an FHA loan,” the information you need will instead relate to MIP.

Can you remove MIP from an FHA loan?

Changes in FHA policy over the years mean your options for removing MIP from your FHA loan vary depending on when your loan originated.

Option 1. Have MIP removed automatically, based on eligibility

For loans issued between January 2001 and June 3, 2013, MIP is typically canceled when your loan-to-value ratio (LTV) reaches 78%. For loans after this date, MIP will be automatically canceled after 11 years if you made a down payment of at least 10%. If you didn’t make a down payment of at least 10%, MIP will remain throughout the loan.

Staying on track with your monthly payments can help keep your loan in good standing as you approach these MIP cut-off points. If you believe that your loan meets the criteria for automatic FHA MIP removal, but you’re still paying, consider contacting your loan servicer for clarification.

Option 2. Refinance to a conventional mortgage

When you’re ineligible for automatic monthly/annual MIP removal, you may want to consider refinancing to a conventional mortgage. This loan will not come with the MIP required with an FHA loan. However, refinancing will have its own application process and terms to consider, such as a new interest rate and closing costs.

• Credit considerations: If your credit score has improved since buying your home, you may find that you’re eligible for more favorable rates on a new mortgage.
• LTV ratio: Owning a higher percentage of your home (especially if it’s improved in value over the years) may lower your LTV ratio. This can improve the loan terms you qualify for.

In summary

FHA loan requirements reduce barriers for new homeowners. However, the addition of up-front and monthly MIP may require additional budgeting or management. Depending on when your loan was originated, monthly/annual MIP may expire after a certain time or repayment ratio. If you’re interested in exploring your refinancing options, consider reaching out to a Chase Home Lending Advisor for assistance.