Home buyers pay an upfront mortgage insurance premium when they close on an FHA loan. This upfront fee — known as UFMIP or MIP — equals 1.75 percent of the loan amount.
This fee is refundable when you refinance into another FHA loan, like the FHA Streamline Refinance or the FHA Cash-out Refinance, within three years of closing your FHA home loan.
Your refundable amount will get smaller each month, and you will no longer be eligible for any refund amount after three years.
| Months after closing | MIP refund | Months after closing | MIP refund | Months after closing | MIP refund |
| 1 | 80% | 13 | 56% | 25 | 32% |
| 2 | 78% | 14 | 54% | 26 | 30% |
| 3 | 76% | 15 | 52% | 27 | 28% |
| 4 | 74% | 16 | 50% | 28 | 26% |
| 5 | 72% | 17 | 48% | 29 | 24% |
| 6 | 70% | 18 | 46% | 30 | 22% |
| 7 | 68% | 19 | 44% | 31 | 20% |
| 8 | 66% | 20 | 42% | 32 | 18% |
| 9 | 64% | 21 | 40% | 33 | 16% |
| 10 | 62% | 22 | 38% | 34 | 14% |
| 11 | 60% | 23 | 36% | 35 | 12% |
| 12 | 58% | 24 | 34% | 36 | 10% |
The word “refund” can be misleading. The Federal Housing Administration won’t send you a check in the mail. Instead, it’ll let you “re-use” part of the upfront MIP you’ve already paid.
You can reuse the FHA insurance premium only if you’re refinancing into another FHA loan — and only if you refinance within three years.
The FHA allows these partial refunds because MIP has a purpose. This fee helps lenders offer lower interest rates to borrowers who have riskier applications. It’s the main reason FHA loans can be a really good deal for home buyers with lower credit scores.
But the benefits of upfront MIP build slowly; your savings accrue gradually, with each monthly mortgage payment you make.
If you don’t keep your loan long enough to benefit very much from its lower interest rate, the FHA will refund part of the fee so you can re-use the money on your next FHA loan.
To calculate your MIP amount for your new FHA refinance loan, you’ll need to know the following figures:
Multiply your original upfront MIP amount by the eligible refund percentage to determine your total refund amount.
For example, if your original MIP amount was $2,500 on a loan that closed 10 months ago, then your eligible refund percentage is 62%. Your MIP refund amount is $1,550 ($2,500 x 0.62).
This refund amount will be applied to the upfront MIP due on your FHA refinance loan.
To calculate your MIP amount for your new FHA refinance loan, you’ll need to determine the following figures:
Next, subtract your MIP refund amount from your new mortgage loan’s UFMIP amount. This amount is the total UFMIP you owe on your new refinance loan.
For example, if your new refinance loan is $200,000, then your new UFMIP amount is $3,500 ($200,000 x 0. 0 175). Now, let’s say your MIP refund amount is $1,800.
That means, you’ll only have to pay $1,700 UFMIP towards your new refinance loan ($3,500 – $1,800 = $1,700).
The FHA has specific eligibility requirements for MIP refunds both for your original FHA loan and your new FHA refinance loan. To be eligible, your current FHA loan must:
Other things to note:
FHA MIP refunds are not eligible as cash refunds. Rather, they are credited directly toward the UFMIP on your new FHA loan.
The HUD underwriting guidelines state: “If the borrower is refinancing his/her current FHA loan to another FHA loan within 3 years, a refund credit may be applied to reduce the amount of the UFMIP paid on the refinanced loan.”
The U.S. Department of Housing and Urban Development (HUD) is the administrator of FHA loans. HUD has created a Mortgage Insurance Premium Refund Support Service Center where you can ask questions about mortgage insurance refunds. You can contact HUD with your questions in one of the following ways:
To search this database, you will need your FHA case number which should be part of your original loan documentation.
In addition to the upfront mortgage insurance premiums of 1.75 percent, all FHA loans charge an annual FHA mortgage insurance premium. Each premium charges a different percentage on the base loan amount and has specific requirements.
These annual premium amounts vary based on your loan term and down payment amount:
The FHA divides these annual fees into 12 monthly installments. Each monthly mortgage payment will include an MIP installment.
For example, a loan of $200,000 with an annual fee of 0.85 percent requires $1,700 in annual insurance fees the first year. To cover this cost, the FHA will add about $142 to each monthly payment.
Keep in mind all FHA insurance premiums are calculated based on your loan amount which, because of your down payment, should be smaller than your home’s purchase price. In addition, while your MIP rate stays the same, the actual amount you owe each year will go down as you pay off your loan balance over time.
The partial refund of your upfront mortgage insurance premium grows smaller by 2 percentage points each month. After 36 months, you’re no longer eligible for an MIP refund. Scroll up to see a chart of refund amounts by month.
The Federal Housing Administration insures a cash-out refinance loan. Like all cash-out refis, this loan works by borrowing against the home equity you’ve built up. If you have enough equity to meet the FHA’s and your lender’s rules, you can get cash back at closing.
Part of your FHA loan’s upfront mortgage insurance premium can be reused if you refinance into another FHA loan within three years. The amount of your FHA MIP refund grows smaller each month.
The FHA’s MIP adds 1.75 percent of the loan amount to your loan upfront. This fee can be paid as part of your loan’s closing costs or it can be rolled into the loan amount. The FHA also charges an annual mortgage insurance premium. For borrowers with 30-year terms who made the minimum down payment of 3.5%, the annual MIP will tack on 0.85 percent of the loan amount each year.
Most FHA-authorized mortgage lenders will automatically apply your FHA MIP refund to your new MIP amount due. If you’re refinancing your FHA loan into another FHA loan, ask your loan officer to make sure your refund gets applied to your new upfront MIP.
If you have enough home equity, you can get a cash-out refinance to borrow against your equity. FHA purchase and Streamline Refinance loans do not allow cash back at closing.
Your FHA loan’s annual MIP will remain for the life of the loan unless you put more than 10 percent down. In that case, the premium goes away after 11 years. You can also refinance into a conventional loan to eliminate MIP. Conventional loans will not require private mortgage insurance (PMI) if you have at least 20 percent in home equity. In addition, you’ll need a credit score of at least 620 to refinance into an FHA loan.
Current interest rates have slowed the demand for refinance loans.
Meanwhile, home values have continued to rise in many markets, creating more equity for more homeowners.
If you’re thinking about getting an FHA refinance, you may be able to save money through an FHA MIP refund.