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Can You Cancel the FHA mortgage insurance premium (MIP)? You bet.

by Peter G. Miller
July 11th, 2007

Published reports have recently stated that the FHA monthly insurance premium (MIP) cannot be cancelled and that it lasts the life of the loan. This old cancellation policy does not apply to FHA loans made after January 2001.

According to HUD Mortgagee Letter 00-38

“In the past, some FHA borrowers have paid annual mortgage insurance premiums throughout the life of their mortgages. Effective for all loans closed on or after January 1, 2001, FHA’s annual mortgage insurance premiums will be automatically canceled under the following conditions:

*For mortgages with terms more than 15 years, the annual mortgage insurance premiums will be canceled when the loan to value ratio reaches 78 percent, provided the mortgagor has paid the annual mortgage insurance premiums for at least five years.

*For mortgages with terms 15 years and less and with loan to value ratios 90 percent and greater, the annual mortgage insurance premiums will be canceled when the loan to value ratio reaches 78 percent, irrespective of the length of time the mortgagor has paid the annual mortgage premiums.

*Mortgages with terms 15 years and less and with loan to value ratios of 89.99 percent and less will not be charged annual mortgage insurance premiums.

Since most FHA mortgages, and most mortgages generally, are repaid before original loan balances fall 22 percent, this FHA policy may not seem as though it has much value. However, there are people who have their loans for many years and for them this is a good policy.

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This entry was posted on Wednesday, July 11th, 2007 at 1:30 am and is filed under . You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.

15 Responses to “Can You Cancel the FHA mortgage insurance premium (MIP)? You bet.”

  1. Mortgage Says:

    I still trying to cancel mine.

  2. lorna richardson Says:

    Isn’t MIP insurance paid by buyers supposed to kick in if a loan A) goes into forclosure or B) has to suffer a short sale.

    If so the bank is actually getting paid twice.
    please let me know about this. I am a realtor.
    Thanks
    Lorna

  3. Peter G. Miller Says:

    The lender is only being paid by the FHA if there is a shortfall with the loan.

    The banks is not getting the premium, it is being collected for the FHA.

    Peter

  4. Laura Roman Says:

    I have a FHA Loan since May of 2003. I have been late on 2 payments til the present time. When can this MIP insurance be cancelled?

  5. Victor A. Delapa Says:

    Late payments have no affect on when the MIP can be canceled. The only 2 driving factors behind cancelling MIP are: 1. Time & 2. LTV.

    In order to cancel MIP (on a 20, 25 or 30 year fixed loan) the MIP must have been paid monthly for a period of 5 years

    AND

    The equity stake in the property must be at least 78% (78 LTV)

    That’s it!!

    Also, there are never pre-payment penalties on FHA loans, which means a property owner can refinance or sell the property at any time he/she wishes and there will be ABSOLUTELY NO MONETARY PENALTY incurred for doing so! :)

  6. Dee Says:

    I purchased a home under FHA/HUD in 2000. The down payment of $1260 was covered by a second lein which I could have paid off had I known I could. They never mentioned that.

    I have lived in my home ten years now and have always paid my mortgage on time. The value of the home is $80,000-$85,000 and I owe $42,000.

    They told me that “My mortgage loan is not subject to FHA MIP cancellation requirements”.

    Is this because the rules changed the year after I purchased my home? Or could there be another reason, like the $1260 lien.

    Thanks, Dee

  7. Fritz Franklin Says:

    I have paid my FHA Insurance for 5 years now. You mention 78% Loan to Value; is the LTV calculated from the original sales price or from some new appraised value?

  8. Victoria Says:

    I tried cancelling my MIP with my Mortgage Co. They said I didn’t qualify. I must of closed my loan on or after 12/28/05 and I closed 12/14/05. They also mentioned 234(c) and 204 (k). I guess I have to do the research because they didn’t give me any explanation as to what that means. If you can lend some help…would greatly appreciate it.

  9. Peter G. Miller Says:

    Victoria –

    FHA insurance cannot be cancelled during the first five years of the loan. You will not qualify until at least December 2010.

  10. Roikoe Says:

    If you refinance does the 5-year clock on PMI start over again?

  11. Gerry McLough Says:

    Please help! I have bookmarked your site. I purchased a home in May 2010 for 120k (loan 118k). The home appraised for 150k weeks before closing. The appraisal was a requirement of the financing. I am not sure why but PMI was applied to my loan from the start. Because I had immediate equity representing a borrowed ammount of only 72% (below 78%), should PMI have ever been applied to my loan? If not, what should I do about it?
    My loan was sold from the originator to GMAC with the PMI attached. Please let me know what you think. As a disclamer please know that I do not consider any information legal advice and thank you for your time. I really appreciate it. Good site.

  12. Michael Tran Says:

    Gerry McLough, your (98%LTV) FHA loan has MIP because your loan was based on PURCHASE PRICE and not appraise value. I am assuming that your loan is an FHA, so therefore you need to pay the monthly insurance premium for the next 5 yrs then you can ask your servicer to cancel it.

  13. Rosa Ramirez Says:

    I will be purchasing a home in 2 months with a FHA loan. I am putting 10 % down. Do I still have to pay the mortgage insurance for 5 years even if I reach the loan to value ratio of 78 percent before that?

  14. susan Says:

    I purchased a home in Dec. 2008. The purchase price was $308k and I borrowed only $127k.I got an FHA loan. Why am I paying for MIP when I put more than half down?

  15. John Batiste Says:

    I am asking a previously asked question that was never answered…

    On the 5 yr MIP IN clock does it start over if refinanced.. during the 5 yr period…i had only 4 months left to make the 5 yrs. home appraised for $115 with only $102 owed

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