Can You Cancel the FHA mortgage insurance premium (MIP)? You bet.
July 11th, 2007
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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.
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March 20th, 2009 at 4:55 am
I still trying to cancel mine.
October 29th, 2009 at 9:37 am
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
October 31st, 2009 at 4:52 pm
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
January 12th, 2010 at 7:18 pm
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?
March 1st, 2010 at 10:58 am
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!