Refinance FHA To Conventional — The Quick Read: Yes, a conventional refinance can pay off an FHA loan and end the FHA mortgage insurance premium. It works when the home has enough equity and the borrower can requalify on credit, income and debts. The new loan may carry no mortgage insurance at all, or insurance that can come off later. The decision comes down to how much longer the FHA premium would run, how much equity the home has now, and whether the closing costs pay back before the borrower moves or sells.
Key Takeaways
- The FHA premium has two parts: an upfront premium that is financed into the loan, and an annual premium billed monthly.
- On a thirty-year FHA loan above 90% LTV, the annual premium lasts for the term. At or below 90%, it ends after eleven years.
- Refinancing into a conventional loan pays off the FHA loan, so the FHA premium stops. Conventional mortgage insurance may apply, but it has equity-based exit rules.
- An FHA Streamline is not the way out. It keeps FHA insurance.
- The borrower requalifies in full: credit, income, assets, debts and a new appraisal.
- Every figure here varies by lender and program. Guidelines, property type, leverage, and credit profile all apply.
What Actually Happens in This Refinance
A new conventional loan pays off the old FHA loan. That is the whole move. The FHA loan ends, and its insurance ends with it.
The new loan lives under conventional rules. If the new balance is 80% or less of the home’s value, conventional lenders generally do not require mortgage insurance. Above that, they do, and the cost depends on credit and LTV.
Most borrowers consider this refinance because of one fact. On many FHA loans the annual premium does not drop off as the balance falls. A conventional loan with insurance is different. That insurance can be removed once enough equity builds up.
Lendmire’s team sees this refinance most often on loans that started at the minimum investment. The borrower put little down, so the original LTV was above 90%, and the premium was set to run the full term. Years of payments plus price growth have since built equity. That equity is the key that opens the conventional door.
How Long the FHA Premium Actually Runs
The premium clock depends on when the loan was originated, its term and its original LTV. Check this before anything else. It tells you how much there is to save.
For loans with case numbers assigned after HUD’s mid-2013 change, HUD Mortgagee Letter 2013-04 sets the annual premium for the maximum duration the statute allows. HUD’s FHA Connection page on the final premium date explains that the duration depends on the loan term and LTV at origination. In the programs Lendmire places, that works out as follows:
- Thirty-year loan, original LTV above 90%: the annual premium lasts for the term.
- Original LTV at or below 90%: the annual premium ends after eleven years.
Paying down principal early does not shorten either clock on these newer loans. Neither does home price growth. That is why the refinance matters.
Older loans follow different rules. For case numbers assigned before the mid-2013 change, HUD’s published answer on premium duration says HUD cancels the annual premium automatically at 78% of the original value. It also says HUD does not use a new appraisal to decide that date. Cancellation follows the original payment schedule. A borrower with one of these older loans may find the premium is already close to ending, and the refinance saves less.
Your closing disclosure from the original purchase shows the case number date. Your servicer can confirm the premium end date in writing. Get that date first.
Step by Step: How the Refinance Is Underwritten
Here is how the deal works, in the order a processor works it.
1. Check the insurance clock. Confirm the case number date, original LTV and term. This sets the upside.
2. Confirm it is a conventional refinance, not an FHA one. The FHA Streamline refinances an FHA loan into a new FHA loan. It needs no appraisal and only a limited credit review. It requires a net tangible benefit. The premium continues. So a Streamline can lower a payment, but it cannot drop the premium.
3. Pick the refinance type. Paying off the existing loan with no meaningful cash back is a “limited cash-out” refinance under the Fannie Mae Selling Guide. Taking cash out is a different transaction with a lower LTV cap. A borrower who wants cash at closing should expect a lower maximum loan against the home.
4. Order the appraisal. The appraised value sets the LTV. The LTV decides whether mortgage insurance is needed and how it is priced. Under the Fannie Mae Selling Guide, mortgage insurance is required on a conventional first mortgage when the LTV is above 80%. Coverage steps up as the LTV rises.
5. Requalify in full. Credit, income, assets and debt-to-income are all reviewed again. A streamline skips most of this. A conventional refinance does not. Credit score and ratio requirements come from the loan program and the automated underwriting findings, not from a single universal floor.
6. Review the Loan Estimate. The lender issues it after application. It itemizes the costs. The Closing Disclosure shows the final figures before signing.
7. Run the break-even. Divide the total upfront cost by the monthly savings. The result is the number of months until the refinance pays for itself. The same math applies to any upfront cost, so run it on the full cost shown on the Loan Estimate.
FHA Premium vs. Conventional Mortgage Insurance
This table is the core comparison. The two systems end in very different ways.
| Factor | FHA premium | Conventional PMI |
|---|---|---|
| Structure | Upfront (financed) plus annual | Usually monthly; other structures exist |
| Priced by credit score | No | Yes |
| Ends by equity | Not on newer loans above 90% original LTV | Yes, by request and automatically |
| Ends by time | Eleven years if original LTV was 90% or less | Not by time alone |
| Early exit path | Refinance | Cancellation or refinance |
That “priced by credit score” row matters. A borrower with strong credit often finds conventional mortgage insurance cheaper than the FHA annual premium. A borrower with weaker credit may not. Conventional insurance is risk-priced, so the result depends on the file.
The Rules for Removing Conventional Insurance
This is the one rules section in the article, and it is short. Under the Homeowners Protection Act, as the CFPB explains, a borrower can ask the servicer to cancel PMI when the balance is scheduled to reach 80% of the home’s original value. The request is in writing. The borrower needs a good payment history, certification of no junior liens, and evidence that the value has not fallen below the original value. The servicer must terminate PMI automatically at a scheduled 78%.
These rights cover single-family principal residences. They do not cover lender-paid mortgage insurance, and they do not cover loans classed as high-risk. Lender-paid insurance replaces the monthly premium with a different cost structure, usually built into the pricing of the loan. The borrower cannot cancel it. Ask which type is on the offer.
A Scenario in Percentages
Picture a borrower who bought with the minimum investment and a loan at 96.5% of the price. Under the rules above, the annual premium on that loan runs the full term. Several years later, regular payments and price growth have brought the new loan amount to about 75% of today’s appraised value.
A conventional refinance at that level generally needs no mortgage insurance. The FHA premium disappears. Nothing replaces it. The borrower then weighs the one-time costs against the monthly savings.
Now change one thing. The balance sits at 88% of the appraised value instead. The conventional loan likely still carries mortgage insurance, priced off credit. It can come off later at the equity thresholds above, but the break-even gets longer. That borrower may be better off waiting a year or two and refinancing once the LTV is lower.
Where the General Rule Breaks
The headline idea is “refinance to drop the premium.” These edge cases are where it does not hold.
Loans that are close to the end of the premium. If the original LTV was 90% or less, the annual premium ends after eleven years. The longer the loan has run, the less a refinance can save. Older loans with automatic cancellation at 78% of original value have the same problem.
Not enough equity. Many files fall short of 80% LTV. The new loan carries conventional insurance. It can still be worth it because that insurance is removable, but the break-even changes. Final terms depend on lender guidelines, property type, leverage, and the borrower’s complete credit picture.
Financed premiums. Fannie Mae allows borrower-purchased mortgage insurance to be financed only for certain transaction types, and sets the coverage on the LTV without the financed premium. Ask whether the cost is financed or paid at closing.
Occupancy and unit count. Maximum LTV varies by occupancy and by one unit versus two to four. The FHA loan was owner-occupied. If the home has since become a second home or rental, the conventional leverage limits are lower. Occupancy decides the leverage.
Condos. The condo project’s review type can lower the allowed LTV. The project questionnaire becomes part of the file. Get it early.
Loans above the conforming limit. Fannie Mae’s high-balance rules require insurance above 80% LTV and cap the LTV at 95% after any financed premium. A homeowner with a large balance should read the related piece on refinancing a jumbo loan to conforming before assuming a limit applies. County loan limits apply, and they change each year. These specifics are subject to lender guidelines and a full review of property, leverage, and credit.
Recently reduced premiums. HUD cut annual premiums for many loans endorsed after a March 2023 effective date. The cut did not change how long the premium lasts. A borrower whose premium was recently lowered may find less monthly savings than expected.
Other conventional options. Some agency products reduce mortgage insurance coverage for qualifying income levels. Programs vary. Ask which conventional options apply to the file.
What Decides Whether It Pays Off
Five factors set the outcome:
- Home value versus loan balance. This sets the LTV, and the LTV decides whether insurance is needed.
- Credit profile. Conventional insurance is priced by risk. FHA’s is not.
- Time left on the FHA premium. More years remaining means more to gain.
- Time in the home. A short stay may not outlast the break-even.
- The new loan’s terms against the old. A different loan term or pricing structure changes the picture, so compare whole-loan costs, not just the premium.
If the borrower plans to sell soon, the answer is often no. If the plan is ten more years, the premium math gets heavy fast.
Common Misconceptions
“FHA insurance drops off at 20% equity.” On newer loans it does not. Duration follows original LTV and term.
“An FHA Streamline removes the premium.” It does not. It is FHA to FHA.
“Conventional means no mortgage insurance.” Not when the LTV is above 80%.
“PMI is permanent.” It is not. It can be canceled and must end at the thresholds above for covered loans.
“A new appraisal cancels my old FHA premium.” For older loans, HUD says it does not consider new appraised values.
“The refinance is free once the premium is gone.” It has its own closing costs, and “no-cost” offers build those costs into the loan some other way.
“My servicer will tell me when to refinance.” Do not count on it. The borrower and the loan officer need to check the case number date and the premium end date.
Key Terms Defined
Annual mortgage insurance premium (MIP): The FHA insurance charge billed monthly as part of the payment.
Upfront premium: A one-time FHA insurance charge, 1.75% of the base loan, usually financed into the loan.
PMI: Private mortgage insurance, the conventional-loan version, used when LTV is above 80%.
LTV: Loan-to-value, the loan balance divided by the home’s appraised value.
Limited cash-out refinance: A refinance that pays off the old loan and costs, with little or no cash back to the borrower.
Net tangible benefit: A test on FHA Streamlines requiring the refinance to improve the borrower’s position in a measurable way.
Break-even: The months it takes for monthly savings to cover the upfront cost of the refinance.
What the Lender Looks For
A checklist for the file:
- A current appraisal and a calculated LTV
- Pay stubs, traditional personal-income documentation or other income documents, depending on how the borrower earns
- Two months of asset statements
- The current FHA payoff statement and the premium end date
- Homeowners insurance and the title information
- The condo questionnaire if the home is in a project
Missing a document delays review. Missing a premium end date delays the break-even math. Collect both before applying.
Tax treatment can depend on your situation; borrowers should speak with a qualified tax professional before relying on any deduction or credit.
Choosing Among FHA Loan Programs and Conventional
The FHA loan programs are built for buyers who need low down payments and flexible credit. They do their job at purchase. The cost shows up later as the long-running premium. That is why the refinance exists. Once credit improves and equity builds, conventional is the stronger long-term structure. Each program is subject to lender guidelines and full file review, and none of this is a commitment to lend.
Frequently Asked Questions
Can I refinance an FHA loan into a conventional loan right away?
Usually, if the new lender accepts the file. Conventional refinances of FHA loans do not carry the waiting period that FHA Streamlines do. The loan still has to meet the lender’s guidelines on credit, income, equity and occupancy. A very recent purchase may raise questions on how value is set.
What if I do not have 20% equity?
The new conventional loan will likely carry mortgage insurance. It may still be worth it, because conventional insurance can be removed at the equity thresholds and FHA insurance on newer high-LTV loans cannot. The break-even is longer, so run it before deciding. Waiting until the LTV drops can also be a smart move.
Will an FHA Streamline get rid of my premium?
No. A Streamline keeps FHA insurance in place. It offers a simpler file, with no appraisal and a limited credit review, but the premium continues. Only a payoff by a non-FHA loan ends it.
How do I know when my FHA premium would end anyway?
It depends on the case number date, the term and the original LTV. Your servicer can state the end date, and HUD’s published guidance explains how duration is set. If the end date is near, refinancing for the premium alone may save little.
Does a new appraisal help cancel an old FHA premium?
Not for loans under the older rules. HUD says it does not use new appraised values for those, and cancellation follows the original schedule. A new appraisal matters for the refinance itself, because it sets the new loan’s LTV.
If You Are Weighing This Refinance
If you are weighing a refinance and want the break-even run on your own numbers, Lendmire can help you compare the programs on the same home. Bring the case number date, the premium end date and a rough sense of your equity. The numbers tell you whether to move now or wait. You can request a scenario review to start. A premium that is nearly finished is often the best reason to leave the loan alone.
About Lendmire
As a mortgage broker (NMLS# 2371349), Lendmire helps home buyers in 16 states pair an FHA, USDA or HUD-184 first lien with a down payment assistance option arranged through wholesale lenders. Lendmire is never the lender; program terms are set by the lender and the agency guidelines. Scotsman Guide named Lendmire a Top Mortgage Workplace in both 2025 and 2026.
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References
1. HUD Mortgagee Letter 2013-04
2. HUD FHA Connection, Final MIP Date
3. HUD Answers, MIP for pre-June 2013 case numbers
4. Fannie Mae Selling Guide, Limited Cash-Out Refinance Transactions
5. Fannie Mae Selling Guide, Provision of Mortgage Insurance
6. CFPB: When can I remove PMI?
7. HUD FHA INFO 2023-11, annual premium reduction
This article is part of Lendmire’s FHA Loan series — every loan program’s qualification details, guidelines, and scenarios live on the loan options page.
Related reading: FHA Cash-out Refinance Rules: Occupancy, Loan-to-value, And Credit · FHA Streamline Refinance Requirements: Payments, Timing, And The Benefit Test
Brandon Miller
Founder & CEO, Mortgage Loan Originator, Lendmire LLC
- Mortgage Loan Originator · NMLS# 1129696 · Verify on NMLS Consumer Access
- North Carolina Real Estate Broker · License# 343312 · Verify on NCREC
- North Carolina Insurance Producer · License# 19053198 · Property, Casualty, Life, Health · Verify on NAIC SBS
- Lendmire LLC · Firm NMLS# 2371349 · Verify firm licensure
Required disclosures. Lendmire (NMLS# 2371349) operates as a licensed mortgage broker, not a direct lender or depository. The discussion in this article is general in nature and should not be relied upon as financial, legal, or tax advice — every investment scenario is unique and should be reviewed by a qualified professional. Any loan inquiry is subject to lender underwriting, and this article is not a commitment to lend or a guarantee of approval. Mortgage rates, loan terms, and program guidelines vary by borrower, property, and state, and may change without notice. Equal Housing Opportunity. Verify licensure at NMLS Consumer Access.