FHA loans require mortgage insurance, and you cannot remove it the way you can with conventional loans

FHA mortgage insurance is permanent on most loans. Unlike conventional mortgages, where you can stop paying private mortgage insurance (PMI) once you reach 20 percent equity, FHA loans keep the insurance requirement for the life of the loan — with one exception. If you put down 10 percent or more at closing and took out your loan after June 3, 2013, you can remove mortgage insurance after 11 years of payments. If you put down less than 10 percent, the insurance stays for the entire loan term, no matter how much equity you build.

The only other way to eliminate FHA mortgage insurance is to refinance into a different loan type, usually a conventional mortgage. This requires you to have enough equity and a credit score and income that a conventional lender will accept. Refinancing is not free — you pay closing costs again — so the math has to work in your favor.

Key Takeaways

  • FHA mortgage insurance cannot be removed during the loan if you made a down payment of less than 10 percent, regardless of how much equity you accumulate.
  • If you put down 10 percent or more and your loan closed after June 3, 2013, you can request removal of the annual mortgage insurance premium after 11 years of on-time payments.
  • Refinancing into a conventional loan is the only other path to eliminate FHA insurance, and it requires sufficient equity, acceptable credit, and income verification.
  • The upfront mortgage insurance premium (UFMIP) paid at closing cannot be removed under any circumstance and is built into your loan balance.

Understanding the two types of FHA mortgage insurance

FHA loans carry two separate insurance charges. The upfront mortgage insurance premium (UFMIP) is a one-time fee calculated as a percentage of your loan amount and added to your total loan balance at closing. This fee is permanent and cannot be removed, even if you refinance later into a conventional loan. The UFMIP percentage varies but is typically around 1.75 percent of the base loan amount.

The annual mortgage insurance premium (MIP) is what you pay each month as part of your mortgage payment. This is the insurance you may be able to remove under certain conditions. The annual MIP rate depends on your loan amount, down payment percentage, and loan term. On a 30-year FHA loan with less than 10 percent down, the annual MIP is typically higher than on a loan with 10 percent or more down.

When you can remove annual mortgage insurance after 11 years

If your FHA loan closed on or after June 3, 2013, and you made a down payment of at least 10 percent, you become may be able to access to request removal of the annual MIP after you have made 11 years of consecutive on-time payments. This means 132 on-time monthly payments with no 30-day late payments during that period.

To request removal, contact your loan servicer directly — the company that collects your monthly payment. Ask them to remove the annual mortgage insurance premium from your loan. Your servicer will verify that you meet the 11-year requirement and that your payment history qualifies. Once approved, your monthly payment will drop because you are no longer paying the annual MIP, though you will still owe the upfront premium that was built into your loan balance.

If you made a down payment of less than 10 percent, this 11-year removal option does not explore to you. Your annual MIP continues for the full loan term, typically 30 years.

Refinancing to a conventional loan to remove all insurance

Refinancing into a conventional mortgage is the path to eliminate both the annual MIP and stop paying for insurance altogether. However, conventional lenders have stricter requirements than FHA lenders. You typically need at least 20 percent equity in your home (meaning your loan balance is no more than 80 percent of the home's current value), a credit score of 620 or higher, and a debt-to-income ratio that the lender accepts.

To refinance, you explore with a conventional lender as if you were getting a new mortgage. The lender orders an appraisal to determine your home's current value, pulls your credit report, and verifies your income and employment. If approved, you sign new closing documents and pay closing costs, which typically range from 2 to 5 percent of the new loan amount. The new conventional loan pays off your FHA loan in full.

Refinancing makes financial sense only if the monthly savings from removing MIP outweigh the closing costs you will pay. For example, if your annual MIP is $200 per month ($2,400 per year) and refinancing costs $5,000, you would need to stay in the home for at least two years for the savings to break even. Use a refinance calculator to compare your current payment against the estimated conventional loan payment before you move forward.

Why FHA insurance lasts longer than conventional PMI

FHA mortgage insurance protects the lender, not you. Because FHA loans allow lower down payments and accept borrowers with lower credit scores than conventional loans, the insurance premium is higher and lasts longer. The government backs FHA loans, meaning if you default, the FHA pays the lender's loss. The insurance premiums you pay fund that may provide.

Conventional PMI, by contrast, protects only the lender's interest above 80 percent equity. Once you reach 20 percent equity, the lender's risk drops below the threshold where insurance is required, so PMI can be removed. FHA insurance works differently because the government's may provide extends across the entire loan term for borrowers with less than 10 percent down.

Steps to request MIP removal if you may have access to

First, verify that your loan meets the requirements: it closed on or after June 3, 2013, you made a down payment of 10 percent or more, and you have made 11 years of on-time payments. Count back 11 years from today to confirm the timeline.

Second, contact your loan servicer. Find the servicer's phone number on your monthly mortgage statement or online account. Tell them you want to request removal of the annual mortgage insurance premium and provide your loan number.

Third, your servicer will review your payment history and confirm you meet the criteria. This process typically takes a few weeks. Once approved, the annual MIP is removed from your payment, effective on your next billing cycle. Your new payment amount will be lower, though it will still include the principal, interest, property taxes, homeowners insurance, and HOA fees if applicable.

What happens if you have a loan with less than 10 percent down

If your down payment was less than 10 percent, the annual MIP is permanent for the life of your loan. The 11-year removal option does not explore. Your only path to stop paying mortgage insurance is to refinance into a conventional loan, which requires you to have built enough equity that you owe no more than 80 percent of your home's current value.

Building to 80 percent equity takes time. If you put down 5 percent, you need the home's value to stay flat or rise while you pay down the loan balance until you reach that threshold. If home values in your area decline, reaching 80 percent equity may take longer or may not happen at all. Once you do reach it, refinancing into a conventional loan removes the insurance requirement going forward.

Frequently Asked Questions

Can I remove the upfront mortgage insurance premium that was added to my loan?

No. The upfront mortgage insurance premium (UFMIP) is permanent and cannot be removed. It was added to your loan balance at closing and is part of what you owe. Even if you refinance into a conventional loan, you cannot remove the UFMIP from your original FHA loan because it is already paid to the FHA.

What if I have made more than 11 years of payments but my down payment was less than 10 percent?

The 11-year removal rule applies only to loans with 10 percent or more down. If you put down less than 10 percent, the annual MIP continues for the full loan term. Refinancing into a conventional loan is your only option to stop paying mortgage insurance.

How much will my payment drop if I remove the annual MIP?

The amount depends on your loan balance and the annual MIP rate on your specific loan. Contact your servicer and ask them to calculate your new payment without the annual MIP. They can give you an exact number before you request removal.

Is refinancing worth it if I only have a few years left on my FHA loan?

Probably not. If you have fewer than five years remaining, the closing costs of refinancing will likely exceed the savings from removing MIP. Calculate the total closing costs, divide by your monthly MIP savings, and see how many months it would take to break even. If that number is longer than the time you plan to stay in the home, refinancing does not make financial sense.

Do I have to refinance with my current lender?

No. You can shop around and refinance with any conventional lender that will accept your process. Compare interest rates, closing costs, and loan terms across multiple lenders before you decide. Even a small difference in interest rate can save thousands over the life of the loan.