I am looking into refinancing greater than 80% loan to value on an FHA loan. Does anyone know about my options regarding mortgage insurance? I think that they want half a point per year, but is there a minimum term? Can I get rid of the insurance once I go less than 75% loan to value?
I believe on a 30 yr, you get the PMI no matter what LTV you are at, for a certain amount of time, and at the same factor.
I think if you go to a 15 yr loan, the only MI is the up-fronting funding (UFMIP), instead of monthly and UFMIP.
Not 100% sure how accurate that is, I always get confused with the FHA mortgage insurance…
From www.mortgage101.com:
FHA Mortgage Insurance Costs
FHA requires a mortgage insurance premium (MIP) for its homebuying programs. An up front premium of 1.50% of the loan amount is paid at closing and can be financed into the mortgage amount. In addition, there is a monthly MIP amount included in the PITI of .50%. Condos do not require up front MIP - only monthly MIP.
The mortgage insurance premium paid on an FHA loan is always significantly higher than on a conventional program. On an FHA loan the borrower will be charged a mortgage insurance premium equal to 1.50% of the purchase price of the property and a renewal premium of .500% in subsequent years. By contrast the mortgage insurance premium charged at closing on a conventional program is as low as .500% (with 10% down payment) with renewal rate in subsequent years as low as .300% in subsequent years.
Private Mortgage Insurance vs. FHA Mortgage Insurance
Although the insurance protection concept is similar, there are differences between private mortgage insurance and FHA mortgage insurance. FHA insurance is a government-administered mortgage insurance program that does have certain restrictions. FHA has maximum regional loan limits that are lower than those with private mortgage insurance. FHA may be more expensive, take longer to receive approval, and have fewer payment plan options. FHA insurance lasts for the life of the loan, unlike private mortgage insurance which is cancelable in most circumstances. FHA is a good choice for some borrowers with credit history problems that might need special assistance.
Just went through this last week with my bank concerning my personal residence. After 6 months of ownership and a bunch of improvements followed by a new appraisal I was at 77% LTV, so I wanted to remove the PMI, or so I thought. You have to meet 2 conditions to remove the mortgage insurance from a FHA loan. 1) Be below 78% LTV and 2) 5 years of seasoning on the property. Only way out of it is to refinance into a conventional bank loan when you’re at 80% or lower. I got that info. from an escrow agent at FHA via email last week.
JB is correct—your loan to value needs to be less then 78% and you must have been in the property for 5 years to cancel.
If you can swing a 15 YR note, the front end MIP would be 1.50 and the monthly MIP would reduce to .25%.
When compared to conventional MI requirements, I have found that FHA MIP is lower the majority of times.
Regards,
Scott Miller