Our goal is to give you the tools and confidence you need to improve your finances. Although we receive compensation from our partner lenders, whom we will always identify, all opinions are our own. By refinancing your mortgage, total finance charges may be higher over the life of the loan.
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Mortgage insurance protects lenders from losing money on higher-risk borrowers who might default on their mortgages. This protection helps make home financing available to borrowers who otherwise might not qualify.
Typically, you’ll have to pay for private mortgage insurance on a conventional loan when your down payment is less than 20%. On FHA loans, however, all borrowers must pay mortgage insurance premiums no matter what size their down payment is.
Here’s what you should know about removing mortgage insurance from your FHA loan:
- What is mortgage insurance?
- How to get rid of mortgage insurance on an FHA loan
- How to refinance your FHA loan into a conventional loan
- Why you should compare offers from multiple lenders
What is mortgage insurance?
When it comes to mortgage insurance, private mortgage insurance (PMI) and mortgage insurance premiums (MIPs) are similar but come with some slight differences.
PMI:
- Applies to conventional loans
- Rates depend on your mortgage term, down payment, and credit score
- Monthly costs between 0.14% and 1.86% of the loan amount, depending on your credit score and loan term
MIP:
- Only applies to FHA loans
- Rates depend on your mortgage term, down payment, and loan amount; your credit score isn’t a factor
- Upfront premium cost of 1.75% of the loan amount; annual MIPs cost between 0.45% and 1.05% of the loan amount, depending on your down payment
| PMI | MIP | |
|---|---|---|
| Applies to | Conventional loans | FHA loans |
| Costs |
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How to get rid of mortgage insurance on an FHA loan
Accumulating equity is not enough to get MIPs canceled for many FHA loans. If you took out an FHA loan after June 2, 2013, you can’t request MIP cancellation based on home price appreciation.
The fastest and sometimes only way to remove MIPs on an FHA loan is to refinance into a conventional loan. If you have 20% equity, you can avoid paying PMI on the new loan. You’ll want to know what today’s refinance rates are when considering this option. Credible makes refinancing easy. You can see your rates from our partner lenders in the table below in just three minutes. We also provide transparency into lender fees that other comparison sites don’t. If you want to get rid of your mortgage insurance premiums, here’s how to refinance your FHA loan into a conventional loan. To find out if switching to a conventional mortgage will save you money, you’ll need to know how much your MIP is and how much you might have to pay in PMI. See how much you’re paying for your mortgage insurance premium by looking at your most recent monthly mortgage statement. Finding out how much you might pay in PMI is a bit trickier. If you apply to refinance, lenders will give you an estimate of your PMI costs. Another option is to search online for private mortgage insurance rate cards and see what rate is most likely to apply to your situation given your credit score, equity, and the term of your new mortgage. Here are a few examples of the annual PMI rates you might pay for a 30-year fixed mortgage: If you’re going from a MIP to PMI, it might be worth waiting to refinance until you have more equity or a higher credit score. Another option is to use savings or a gift to bring cash to closing so that you have enough equity to avoid PMI. You’ll also need to consider the closing costs to refinance, which can run you 2% to 5% of the amount you’re borrowing. Learn More: PMI: What Is Mortgage Insurance and Who Needs It? You generally need to have at least 20% equity in your home to refinance into a conventional loan without PMI. To find out how much equity you have, use this formula: (home value – loan balance) / home value For example, if your home could appraise for $300,000 and you owe $200,000 on your mortgage, you have $100,000 of equity. $100,000 is 33.33% of $300,000, so you have about 33% equity. To estimate what your home might appraise for, research what similar homes in your area have recently sold for. Along with having enough equity, you will need a high enough credit score to qualify for a conventional loan: at least 620, depending on the lender and other aspects of your finances. You’ll also need to show you have a steady, ongoing income and a debt-to-income ratio no higher than 43%. Keep Reading: When to Refinance a Mortgage If you’re going to spend the money on closing costs and take the time to refinance, it only makes sense to get offers from at least three lenders to see who can provide you the most savings. Besides getting rid of FHA mortgage insurance, refinancing can have additional benefits. You might be able to: Here’s an example of how much you could save by refinancing your mortgage: Let’s say your current mortgage balance is $200,000, your interest rate is 4.5%, and you have 15 years left on your 30-year mortgage. At your current rate, you’ll pay about $75,397 in interest over your remaining loan term. If you can refinance into a new 15-year fixed-rate loan at 3.5%, you’ll take on a higher monthly payment, but you’ll also only pay about $57,357 over your remaining loan term, a savings of $18,040. If you think refinancing out of your FHA loan is the right move for you, be sure to use Credible to easily compare offers from multiple lenders at once. Credible makes this easy — you can compare multiple lenders and see prequalified rates in as little as three minutes. Find My Refi RateRefinance your FHA loan into a conventional loan
1. First, make sure it will save you money
2. Find out how much equity you have in your home
3. Know if you qualify
Compare multiple lenders
Checking rates will not affect your credit