How to Get Rid of FHA Mortgage Insurance

The most common way to get rid of FHA mortgage insurance is by refinancing into a conventional loan once you’ve built enough equity. But depending on when your FHA loan originated and how much you put down, you may be able to have the insurance removed automatically — no refinancing required.

In this guide, we’ll walk through the rules for FHA mortgage insurance cancellation, how refinancing works, and what to consider before making a move.

A Quick Refresher on FHA Mortgage Insurance

Before discussing FHA mortgage insurance removal, it’s important to understand the two types of mortgage insurance on FHA loans.

• Upfront Mortgage Insurance Premium (UFMIP): Paid at closing or rolled into the loan amount. This fee cannot be removed.
• Annual Mortgage Insurance Premium (MIP): Paid monthly as part of your mortgage payment. This is what most borrowers want to eliminate in order to lower their monthly payment.

FHA mortgage insurance works differently from conventional private mortgage insurance (PMI). With conventional loans, PMI is only required if your down payment is less than 20% and can be canceled once your loan-to-value (LTV) reaches 80%. With FHA loans, every borrower is required to carry mortgage insurance regardless of down payment size.

Savings from Removing Mortgage Insurance

The UFMIP equals 1.75% of your loan amount — on a $300,000 loan, that’s $5,250. You can’t avoid it, but you can pay it at closing or roll it into your balance.

On top of that, most FHA borrowers (those with less than 5% down on a term longer than 15 years) pay an annual MIP of 0.55%, billed monthly. On a $300,000 loan, that’s $1,650 per year — or $137.50 per month.

Monthly MIP Cost by Loan Amount

Loan Amount	UFMIP	MIP (monthly)
$250,000	$4,375	$115
$300,000	$5,250	$138
$350,000	$6,125	$160
$400,000	$7,000	$183

MIP rates vary by down payment and loan term. Many borrowers pay between 0.50% and 0.55% annually.

Remove FHA Mortgage Insurance by Refinancing to a Conventional Loan

Refinancing into a conventional loan replaces your FHA mortgage with a new loan under conventional guidelines. If your LTV is at or below 80% at the time of refinancing, you can avoid PMI on the new loan entirely.

The refinance requires full underwriting — whether you use the same lender or a new one, they’ll review your income, credit, and financial profile. Here are the key factors to consider:

Conventional Loans Have Stricter Eligibility Requirements

Because the federal government backs FHA loans, their eligibility requirements are more flexible. FHA loans are available to borrowers with credit scores as low as 500 (though most lenders require higher). Conventional loans require a minimum score of 620.

FHA loans also allow higher debt-to-income ratios (DTI) — up to 56.99% in some cases — while conventional loans generally prefer DTIs of 43% or lower, though exceptions exist for well-qualified borrowers.

Time the Refinance With Interest Rates

Even if your primary goal is to eliminate mortgage insurance, interest rates matter. If rates have risen since you took out your FHA loan, the higher rate on the new loan could offset the savings from removing MIP. Compare your current rate against today’s conventional rates before deciding.

Here’s a quick look at how FHA and conventional rates are currently trending:

How we source rates and rate trends

Use our refinance calculator to estimate how your payment might change.

Refinancing Means a New Loan Term

When you refinance, you choose a new loan term — typically 10, 15, 20, or 30 years. A longer term reduces your monthly payment but increases the total interest paid. A shorter term does the opposite. Here’s how the numbers compare on a $300,000 loan at 6.5%:

Term	Monthly P&I Payment	Lifetime Interest
15 Years	$2,613	$170,398
20 Years	$2,237	$236,813
25 Years	$2,025.62	$307,686
30 Years	$1,896	$382,633

Assumes a 6.5% interest rate. All figures are for example purposes only and may not be available. Not a commitment to lend.

An Appraisal Could Reveal More Equity Than You Think

Lenders typically require an appraisal during the refinance process. Given how much home values have appreciated in recent years, you may have more equity than you realize — which could open the door to a cash-out refinance that eliminates MIP while also providing funds for a home improvement project or paying off high-interest debt.

Know Your Break-Even Point

Refinancing comes with closing costs — typically 2% to 6% of the loan amount. Before moving forward, calculate your break-even point: how many months you need to stay in the home for the savings to outweigh the costs. If you plan to move before reaching that point, refinancing may not make financial sense.

Shop Around

Don’t evaluate lenders on rate alone. Pay close attention to the APR, which includes both the interest rate and fees. A lender offering a lower rate may offset that advantage with higher closing costs. Getting quotes from at least three lenders is the best way to find the most competitive overall package.

What If You Refinance to Conventional Before You Have 20% Equity?

You don’t need to wait until you have 20% equity to refinance — but you may still be required to pay PMI on the conventional loan if your LTV is above 80%. The key difference is that conventional PMI can be canceled once your LTV reaches 78–80%, giving you a clear path to eliminate it. FHA MIP, by contrast, may last the life of the loan depending on your origination date and down payment.

Refinancing before 20% equity may still make sense if:

• You can secure a better interest rate than your current FHA loan
• You want to switch to a shorter loan term
• You expect to reach 20% equity soon and want the option to cancel PMI down the road

Run the numbers — accounting for the new rate, PMI cost, and closing costs — to confirm it makes financial sense.

Some FHA Loans Have Mortgage Insurance Canceled Automatically

Depending on your loan, MIP may cancel on its own — no refinancing required. Eligibility depends on when your loan originated and your down payment amount.

	Condition
MIP Automatically Canceled	Loan originated Jan. 2001 – June 3, 2013: MIP canceled when LTV reaches 78%*
MIP Automatically Canceled	Loan originated after June 3, 2013 with ≥10% down payment: MIP canceled after 11 years
MIP for Life of Loan	Loan originated July 1991 – Dec. 2000
MIP for Life of Loan	Loan originated after June 3, 2013 with <10% down payment

*Applies to 30-year loans only; borrower must have made at least 5 years of payments.

The Bottom Line

FHA mortgage insurance is a necessary cost for many borrowers — but it doesn’t have to follow you for the life of the loan. Whether through automatic cancellation or refinancing into a conventional loan, there are real paths to eliminating it and reducing your monthly payment.

The right move depends on your equity position, current interest rates, how long you plan to stay in the home, and the cost of refinancing. Ready to see if refinancing makes sense for you? Start your application with Refi.com today.