FHA Mortgage Insurance Removal

If you are a homebuyer who has an FHA-insured mortgage, then you may be paying mortgage insurance premiums (MIP) as part of your monthly mortgage payment. Fortunately, there are ways to remove this insurance from your loan. Read on to learn more about FHA mortgage insurance removal.

What is FHA Mortgage Insurance?

FHA mortgage insurance is a type of mortgage insurance that is required for all FHA loans. This insurance protects the lender in case the borrower defaults on the loan.

The FHA requires borrowers to pay an upfront mortgage insurance premium (UFMIP) of 1.75% of the loan amount at closing, as well as an annual mortgage insurance premium (MIP) that is paid monthly. The annual MIP depends on the loan amount, the loan term, and the loan-to-value (LTV) ratio.

When Can FHA Mortgage Insurance Be Removed?

There are several ways to remove FHA mortgage insurance:

1. Automatic termination
2. Borrower-requested cancellation
3. Refinancing

Automatic Termination

If you have an FHA loan that was originated before June 3, 2013, then your mortgage insurance will automatically terminate when your loan reaches 78% LTV, provided that you have made all of your payments on time.

If you have an FHA loan that was originated on or after June 3, 2013, then your mortgage insurance will automatically terminate when your loan reaches 78% LTV, provided that you have made all of your payments on time and you have paid the annual MIP for at least 11 years.

Borrower-Requested Cancellation

If you have an FHA loan and you want to request the cancellation of your mortgage insurance, then you can do so when your loan reaches 80% LTV. You will need to submit a written request to your loan servicer and provide evidence that your LTV is at or below 80%. Your loan servicer will then determine whether you are eligible for mortgage insurance cancellation.

Refinancing

If you have an FHA loan and you want to remove your mortgage insurance but you do not want to wait for automatic termination or borrower-requested cancellation, then you can refinance your loan into a conventional loan. A conventional loan does not require mortgage insurance if your LTV is 80% or less.

How Can I Calculate My LTV?

Your LTV is the ratio of your loan amount to your home’s appraised value. To calculate your LTV, divide your loan amount by your home’s appraised value. For example, if your loan amount is $200,000 and your home’s appraised value is $250,000, then your LTV is 80% ($200,000/$250,000).

FAQ

What is the purpose of FHA mortgage insurance?

The purpose of FHA mortgage insurance is to protect the lender in case the borrower defaults on the loan. The insurance ensures that the lender will be able to recoup its losses if the borrower is unable to make the payments.

How much does FHA mortgage insurance cost?

The cost of FHA mortgage insurance depends on the loan amount, the loan term, and the loan-to-value (LTV) ratio. The annual mortgage insurance premium (MIP) ranges from 0.45% to 1.05% of the loan amount, depending on these factors.

Can FHA mortgage insurance be removed?

Yes, FHA mortgage insurance can be removed in several ways, including automatic termination, borrower-requested cancellation, and refinancing into a conventional loan.

When can FHA mortgage insurance be removed?

FHA mortgage insurance can be removed when your loan reaches 78% LTV for loans originated before June 3, 2013, or when your loan reaches 78% LTV and you have paid the annual MIP for at least 11 years for loans originated on or after June 3, 2013. You can also request cancellation when your loan reaches 80% LTV, or you can refinance your loan into a conventional loan with an LTV of 80% or less.

How can I calculate my LTV?

To calculate your LTV, divide your loan amount by your home’s appraised value. For example, if your loan amount is $200,000 and your home’s appraised value is $250,000, then your LTV is 80% ($200,000/$250,000).

Conclusion

If you have an FHA-insured mortgage, then you may be paying mortgage insurance premiums as part of your monthly mortgage payment. However, there are ways to remove this insurance from your loan, including automatic termination, borrower-requested cancellation, and refinancing into a conventional loan. By understanding how FHA mortgage insurance works and how it can be removed, you can save money on your monthly mortgage payment and achieve financial freedom.