How FHA Decides When Mortgage Insurance Premium Can Come Off

The Quick Read: The date your loan got its FHA case number and your original down payment set the answer, not today’s equity. On newer loans, a down payment under 10% means the annual premium lasts the full loan term. A down payment of 10% or more ends it after eleven years. Older loans follow a different path, and a refinance out of FHA is the usual exit when you can’t wait. Each figure is subject to lender guidelines and a complete review of property type, leverage, and credit.

What Is the Premium You’re Trying to Remove?

FHA mortgage insurance protects the lender if you default. You pay for it in two parts, and only one of them is the subject here.

The first part is the upfront premium: 1.75% of the base loan amount. Most borrowers finance it into the loan rather than paying it at the table. It is charged once, and it is not what comes “off” later.

The second part is the annual premium. You pay it monthly, folded into your housing payment. Across the wholesale programs Lendmire places FHA loans with, it runs between 0.15% and 0.75% of the balance. The exact level depends on term, loan amount, and LTV. This is the piece borrowers ask about.

It is not called PMI. PMI is the private mortgage insurance on conventional loans, and its removal rules are different. FHA’s version is mortgage insurance premium, or MIP. Mixing the two terms is how many borrowers end up with the wrong expectations.

Here is the first-hand pattern: the borrowers who feel surprised are usually the ones who chose an FHA loan for the low minimum investment. Each of the FHA loan programs we arrange allows as little as 3.5% down at a 580 decision score or higher. That is a smart entry point. It also sets the longest premium path, and that choice is made on day one.

The Two Facts That Control the Outcome

Fact one: the case-number date. Every FHA loan gets a case number early in the process. That date, not your closing date, decides which rule set you fall under. The dividing line is June 3, 2013. Loans with case numbers on or after that date follow the current rules. Earlier ones follow the older rules.

Fact two: the original LTV. LTV is the loan balance divided by the home’s value. “Original” means at the start, not today. It is measured against the lesser of the purchase price or appraised value.

Here is a worked example in percentages. Say you buy with 3.5% down. Your base loan is 96.5% of the price. That is above 90%, so you land on the longest premium path. Now say you buy with 10% down. Your base loan is 90% of the price. That is at the 90% line, which puts you on the shorter path. Terms vary by lender guidelines, property type, leverage, credit profile, and full file review.

One detail helps. HUD’s handbook says the LTV used for cancellation excludes the upfront premium. Financing that 1.75% into the loan does not push your original LTV higher for this test.

Who Actually Decides?

The answer is a three-way split. The rule comes from HUD, the federal agency that runs FHA. The servicer applies it. You verify it.

HUD’s handbook defines cancellation as the end of the obligation to pay premium to HUD. It states that HUD automatically cancels annual premium when the handbook’s conditions are met. The servicer then processes it using FHA’s monthly cancellation function. You do not file a petition, and a phone call does not create a right the rules don’t give you.

That also means no lender, broker, or servicer can waive the rule. Nobody can grant you an early exit on a loan that doesn’t qualify. They can only confirm whether yours does.

How Long the Premium Lasts: The Scenario Table

The post-2013 rows come from HUD’s Mortgagee Letter 2013-04. That letter changed how long annual premium is collected for loans with case numbers on or after the cutoff. It also rescinded the older automatic cancellation for those loans. The pre-2013 rows come from HUD’s answers page for loans closed on or after January 1, 2001.

On that older path, 78% means 78% of the lesser of the original price or appraised value. The test uses the original payment schedule. It does not use a fresh valuation.

For terms of 15 years or less with an original LTV over 90% on newer loans, the premium also lasts the loan term. Confirm any edge in the exact wording of the HUD letter before relying on it.

A servicer or HUD can tell you where an older loan stands.

Why Equity and a New Appraisal Don’t Count

Conventional PMI can often come off when you reach a set equity level. FHA premium on newer loans does not work that way.

For a newer loan, duration is fixed at the start by your original LTV. If your home gains value, the premium stays. If you pay down the balance faster, the premium stays. For the older loans, HUD says it will not consider new appraised values when judging whether you’ve reached the required LTV. Cancellation rests on the initial amortization schedule.

Extra principal payments have one narrow use. On certain older loans, HUD may base cancellation on the actual payment history if you reach 78% early. Even then, it is not sooner than five years from origination, with an exception for 15-year terms. Paying extra still reduces your interest and balance. It just doesn’t move the premium date on a newer loan.

Rate cuts to the annual premium are a separate matter. When HUD lowered premium levels, the duration rules stayed the same. A lower premium is cheaper. It is not shorter.

Edge Cases Where the General Rule Bends

A refinance into a new FHA loan. A new loan gets a new case number. In general, that means the current rules apply and the clock restarts. Treat that as general guidance, and check your own file.

The FHA Streamline. This refinances an existing FHA loan with no appraisal and a limited credit review. It needs a net tangible benefit. The premium continues. It can lower your cost in some situations, but it does not end the insurance.

The FHA rate-and-term and cash-out refinances. Both are new FHA loans, so each carries its own premium schedule. The rate-and-term version reaches 97.75% on a principal residence you’ve occupied for the previous twelve months. The cash-out version reaches 80% LTV on a home you’ve owned and occupied for twelve months before the case number. Lendmire’s piece Cash-Out Refinance Mortgage Insurance Rules When Leaving FHA goes deeper on that move. Exact terms depend on the lender’s guidelines, property type, leverage, and a full review of the borrower’s file.

Special-program loans. Some loan types carry different premium rules. Hawaiian Homelands (Section 247) loans don’t require annual premium. If your loan is one of these, read the specific HUD rules for it.

Cancelling premium doesn’t end FHA insurance. The insurance contract remains in force for the full term. Only your obligation to pay the annual premium stops.

How to Check Your Own Loan

Run this short checklist.

1. Find your closing paperwork. The case number and its assignment date appear on the FHA documents, and your servicer can look them up.

2. Find the original numbers. You want the original price, the appraised value, your down payment percentage, and the loan term.

3. Work out your original LTV. Divide the base loan by the lesser of price or appraised value. Leave out the financed upfront premium.

4. Match yourself to the table above. Case-number date, term, and original LTV give you the path.

5. Ask your servicer for the projected cancellation date. Ask for it in writing. HUD also publishes a lookup tool on its FHA Connection final MIP date page that explains how the “Final MIP Date” is read.

A simple script works. Tell the servicer the case number assignment date shown on your FHA paperwork and the original LTV shown on your closing documents. Then ask for your projected cancellation date.

If you believe your loan has reached its cancellation point and billing continues, ask the servicer to explain the date in writing. Keep your closing documents and statements on hand. If the answer doesn’t match the HUD rules, ask for an escalation to a supervisor and keep notes on who said what.

If You Can’t Wait: The Exit Routes

On a newer loan with premium for the full term, there are three exits. All three are your choices, not FHA’s.

• Pay it off or sell the home. The premium ends when the loan does.
• Refinance into a non-FHA loan. The new lender sets its own equity and credit requirements. FHA’s rules no longer apply, because the FHA loan is gone.
• Stay and wait. If your path is eleven years or the 78% test, patience works. If it is the loan term, waiting doesn’t change the end date.

Whether to refinance or wait is a break-even question. A new loan brings its own costs and its own terms. You compare the premium you’d stop paying against what the new loan asks of you, over the time you expect to keep the home. That depends on your home’s value, your credit, and your plans. A broker can lay the options side by side. The comparison is yours to decide.

A refinance is also where the original down payment lesson pays off for the next purchase. If you’re buying again and want a shorter premium path, a larger down payment is the lever. Lendmire’s piece How Much Mortgage Insurance Premium Adds to an FHA Loan shows how that cost builds.

Misconceptions That Cost Borrowers Money

“I hit 20% equity, so it drops off like PMI.” On loans with case numbers on or after the cutoff, no. Duration is fixed by original LTV.

“A new appraisal will get it removed.” HUD does not use new appraised values for this.

“Extra payments will shorten it.” That helps only on certain older loans, and not before five years from origination.

“The rate cut changed how long I pay.” It lowered the premium’s cost, not its duration.

“Cancelling premium turns my loan conventional.” The FHA insurance contract remains in force.

“Calling my servicer will get it removed.” Cancellation is automatic when HUD’s conditions are met. A call only confirms the date.

Key Terms Defined

Mortgage insurance premium (MIP): The FHA insurance charge, paid as an upfront part (financed) and an annual part (paid monthly).

Case number: The ID FHA assigns to your loan file; its assignment date decides which rule set applies.

Original LTV: The loan balance divided by the lesser of price or appraised value, measured at the start of the loan.

Base loan amount: The loan before the financed upfront premium is added.

Servicer: The company that collects your payments and processes premium cancellation.

Streamline refinance: A refinance of an existing FHA loan with no appraisal and a limited credit review, where the premium continues.

Where This Leaves You

If you are buying a home and want to see whether an FHA loan fits your file, Lendmire can help you compare the options and what each one asks of the file. That includes how your down payment sets the premium path. Lendmire is a mortgage broker arranging these loans through wholesale lenders, and program figures are subject to lender guidelines and full file review. To see your own scenario, request a review with Lendmire.

About Lendmire

Lendmire — NMLS# 2371349 — is a mortgage broker that arranges FHA, VA, conventional and jumbo home purchase and refinance financing in 16 states through wholesale lenders. Every option is subject to the lender’s guidelines and full underwriting. Scotsman Guide named Lendmire a Top Mortgage Workplace in both 2025 and 2026.

References

1. HUD Handbook 4000.1 servicing excerpt

2. HUD Mortgagee Letter 2013-04 (copy hosted by FHFA)

3. HUD Answers: MIP for loans closed on or after January 1, 2001, with a case number before June 3, 2013

4. HUD FHA Connection final MIP date page