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When can I stop paying my monthly FHA mortgage insurance premium?

Cancellation of the FHA annual mortgage insurance premium (MIP) is based on factors including the loan term, loan-to-value (LTV) and regulations in place when the loan is closed.

For loans with FHA case number assigned on or after 06/03/13, FHA will collect Annual MIP for the maximum duration permitted as described in ML 13-04:

All Loan Terms (Greater than 15 years and less than or equal to 15 years):

LTV greater than 90%
Annual MIP will be collected until the end of the loan term, or 30 years, whichever occurs first.

LTV less than or equal to 90%
Annual MIP will be collected until the end of the loan term, or 11 years, whichever occurs first.


For loans closed (or case number assigned, as applicable) 01/01/01- 06/02/13, Annual MIP will be canceled when the LTV reaches 78.00% as follows:

Loan Terms Longer Than 15 Yrs
To be eligible MIP must have been paid for at least 5 years.

Loan Terms 15 Years or Less
There is not a minimum time period for which the MIP must have been paid. The 5 year requirement does not apply.
If the LTV is 78.00% or less at loan closing it is exempt from monthly MIP.

NOTES - For loans closed (or case numbers assigned, as applicable) 01/01/01 - 06/02/13
This MIP termination provision only applies to loans where Up-front MIP (UFMIP) was paid at closing.
Generally, loans closed before 01/01/2001 will not be eligible (MIP is collected as part of the monthly mortgage payment).
FHA will determine when 78% LTV has been reached based on the lesser of the sales price or appraised value at loan origination. (Example- if the lesser of the sales price or appraised value was $100,000, when the loan amount reaches $78,000, FHA will no longer collect MIP).
A loan that reaches 78% LTV sooner than projected due to prepayment may have MIP terminated (but not sooner than five years for loans with terms of more than 15 yrs) if mortgage payments have not been more than 30 days late in the previous 12 months.
The borrower must submit a termination request to the lender and the lender must provide the borrower's request and supporting documentation with respect to the mortgage payments during the last 12 months to FHA for such termination.
Although the MIP is cancelled, the contract of mortgage insurance remains in force.

The changes to the duration of the annual MIP described in ML 13-04 do not apply to Title I or Home Equity Conversion Mortgages (HECMs).

Mortgagee Letters are available at http://portal.hud.gov/hudportal/HUD?src=/program_offices/administration/hudclips/letters/mortgagee

ML 13-04, ML 11-35



REFERENCE

ML 13-04, ML 11-35


REFERRAL LOCATION

FHA National Servicing Center at 1-877-622-8525


DISCLAIMER

All policy information contained in this knowledge base article is based upon the referenced HUD policy document. Any lending or insuring decisions should adhere to the specific information contained in that underlying policy document.