Note: This only applies to FHA mortgages that pre-date June 3, 2013, MIP goes away when the following conditions are met:
30-year loan term : Annual MIP is automatically canceled once the loan reaches 78% loan-to-value and annual MIP has been paid for at least 60 months.
15-year loan term : Annual MIP is automatically canceled once the loan reaches 78% loan-to-value. There is no requirement for MIP to be paid for at least 60 months.
One important thing to keep in mind is that LTV calculations are based on the FHA’s last known value of the home — not its current appraised value.
For many people, the “last known value” is the value of the home at the date of purchase.
A 30-year FHA mortgage with 3.5 percent downpayment will reach 78% LTV in roughly 11 years.
A 15-year fixed with 3.5 percent down would reach 78% LTV in just over two years.
However, it’s possible to end your MIP sooner. …who wants to wait 11 years!
With home values generally rising – you can always refinance out of FHA and into a Conventional product.
With as little as 5% equity, you can refinance into a conventional loan from Fannie Mae or Freddie Mac.
Mortgage insurance rates are lower via Fannie and Freddie, and insurance payment cancel once the home gets 20% equity. (or you can do lender paid MI)
The math gets even better as your home equity levels increase.
With an FHA loan, MIP rates are flat.
With Fannie Mae or Freddie Mac, rates decrease along with your LTV!
That’s it for today!
Have a good day today! …and thanks for reading.
Brett
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