FHA mortgage insurance premiums may be partly refundable

November 07th, 2011

Did you know that you may be eligible for a partial refund of the upfront Mortgage Insurance Premium you paid to get your FHA home loan--if you pay off the loan within 36 months?

If you think you may be eligible for a refund of your MIP premium on an FHA home loan, use this chart, which FHA underwriters use to calculate refunds, to estimate what your MIP refund may be.

    First, you need to determine what your were charged when you closed on your home loan. You can get it from your loan documents, your title company, or the loan servicer you pay each month. Keep in mind that FHA upfront premiums changed from 1.75% to 2.25% in April of 2010, and then dropped to 1% in October of 2010 for a 30-year mortgage. For example, if you took out a $200,000 loan a year ago, when the upfront premium was 2.25%, and refinance its $195,000 balance to a new FHA loan after 13 months, you get the following:

    • Original premium was $4,500 (2.25% * $200,000)
    • Multiply it by .56 (In Year 2, Month 1, the refund percentage is 56%). You get $2,520.
    • Your new loan carries a 1% premium (unless you choose a 15 year loan which is .5%).
    • Multiply your new loan amount of $195,000 by .01 to get $1,950.
    • Subtract the $1,950 from the $2,520 to get your refund of $570.

    If you were to refinance to a non-FHA loan or sell your home instead of choosing a streamline refinance, you'd get the whole $1,950 back.

    30 Yr. Fixed - Refinance Rates from Our Lenders in California

    Lenders
    Rate
    APR
    Monthly Payment
    LoanDepot, LLC
    3.750%
    3.917%
    $695
    Quicken Loans
    4.500%
    4.626%
    $761
    Rocket Mortgage
    4.250%
    4.374%
    $738
     

    MIP Refund Tips

    Make sure your refinance lender knows about the potential refund of your MIP. Ask what paperwork is needed in order to properly process the refund, and follow up to make sure it's sent once your FHA loan is paid off.

    If you refinance your home with another FHA mortgage, your refund can be used to pay your new premium at closing.

    Don't respond to companies that imply only they can get the money for you, or that they can get you more money. It's easy enough to do; your loan agent can help you, and you should not have to pay to get your own money back.

    Posted By :

    Dennis is co-owner and broker of record for Stratis Financial in Southern California. With over twenty years experience in the mortgage industry he has helped homeowners save millions of dollars refinancing their homes. His Weekly Rate and Market Update keeps his clients and real estate professionals educated and informed on the mortgage industry and the economy. Dennis has a degree in Economics and Political Studies from Pitzer College and is married with two children.

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