The Quick Read: The refund is a credit, not a check. It comes from the upfront mortgage insurance premium you paid on your current FHA loan, and it is calculated as a share of that original premium. The share shrinks the longer you have held the loan. On a new FHA loan, the lender nets the credit against the new loan’s upfront premium, so you see it as a smaller premium at closing.
Key Takeaways
- The credit comes only from the upfront premium. The monthly premium is not refunded.
- The math has two halves: the credit on your old loan, then the new upfront premium on your new loan. You subtract one from the other.
- Your old loan’s original premium, and how long you have held the loan, set the size of the credit.
- The credit is measured to your projected closing date. A later date means a smaller credit.
- Refinancing into a conventional loan does not earn this credit. The credit is built for FHA-to-FHA.
- The lender pulls the exact figure from the government’s FHA system. Charts you find online are only estimates.
What the Refund Actually Is
Think of the upfront premium as a prepaid insurance policy. When you got your FHA loan, you paid one lump sum, usually financed into the balance. That lump sum was meant to cover a stretch of insurance coverage.
Refinance savings and break-even estimate
The starting figures are an example value with a balance in proportion and a placeholder for costs. Replace them with yours, and enter the current rate from your statement.
Editable benchmark: 7.32% as of October 22, 2026 · Freddie Mac 30-year average via FRED®. A conventional market reference, not a refinance quote.
Illustrative starting assumptions: a $350,000 home value, a $245,000 current balance, a current rate you enter and a remaining term seeded at twenty-five years, closing costs seeded at $5,000 as an editable placeholder (not a fee quote) and rolled into the new loan, a thirty-year term at the current Freddie Mac benchmark, and property taxes and insurance estimated at typical national rates. Every field is editable.
Illustrative estimate only — not a Loan Estimate, approval, quote, or commitment to lend. The new rate field carries the weekly Freddie Mac thirty-year conventional benchmark, a market reference and not a refinance quote; a refinance is priced by the lender at lock, and the current rate, the remaining term and the closing costs are figures you enter. The current payment is estimated from the balance, the current rate and the remaining term; the break-even divides the closing costs by the monthly saving and ignores the interest effect of a longer term. On the VA IRRRL the funding fee is added to the loan unless the veteran is exempt. Taxes and insurance are editable estimates. Licensed in sixteen states for consumer mortgages; Lendmire is a broker, never the lender.
Refinance into a new FHA loan, and the old policy ends early. The part you prepaid but did not use is the "unearned" piece. That unearned piece is what people call the refund.
It does not arrive as cash. It works as a coupon against the new loan's upfront premium. Many borrowers expect a check, and that is the most common misunderstanding about this topic.
Two quick points on what the credit is not:
- It is not 1.75% of your new loan. That 1.75% is the upfront premium rate on the new loan's base amount, across the programs Lendmire places files with.
- It is not tied to your home's value. A streamline refinance needs no appraisal, so a new value never enters the credit.
If you are new to the program itself, Lendmire's overview of FHA loan programs covers the basics: 3.5% minimum investment on a purchase at a 580 decision score, the upfront premium, and the annual premium.
Key Terms Defined
Upfront premium (UFMIP): The one-time mortgage insurance charge on an FHA loan, set at 1.75% of the base loan amount and usually financed into the loan.
Annual premium: The ongoing insurance charge, between 0.15% and 0.75% of the balance depending on term, loan amount and LTV. It is paid monthly and is never part of the refund.
Base loan amount: The loan before the financed upfront premium is added. The premium percentage applies to this figure.
Unearned premium: The share of your original upfront premium that has not yet been used up by time. This is the credit.
Projected closing date: The date the lender enters when it asks the FHA system for your credit. The credit is measured as of that date.
Netting: Subtracting the old loan's credit from the new loan's upfront premium.
Net tangible benefit: A test on streamline refinances. The new loan must improve your situation in a way the program recognizes, which the lender checks.
How the Refund Is Calculated, Step by Step
The calculation runs in six steps. The lender does most of it, but you should know each piece so you can spot a wrong number.
1. Find the original upfront premium. This is the premium charged on your current loan. It shows up on your original closing paperwork, usually as an FHA premium line in the settlement charges. Your servicer or the lender's payoff paperwork can also confirm it.
2. Fix the projected closing date. The lender picks a date for the new loan. The credit is measured to that day.
3. Measure the time elapsed. The system looks at how long your old loan has been insured. More time means more of the premium has been "used."
4. Apply the unearned share. The refund is the original premium multiplied by the unearned share for that loan age. The exact schedule lives in HUD's system and current guidance, and it is largest soon after closing and falls toward zero over time.
5. Compute the new upfront premium. Take the new loan's base amount and apply the upfront premium percentage. The new premium is still figured on the new base, regardless of your credit.
6. Subtract. New upfront premium minus the credit equals the net upfront premium you actually owe.
That last subtraction is the whole point. The credit never changes the new premium's percentage. It only offsets the dollars.
HUD describes the same thing in its own tools. The HUD FHA Connection tool for refinance authorization lists the unearned upfront premium as the refinance credit. It measures that credit from the projected closing date of the new mortgage.
Why I Am Not Printing a Month-by-Month Chart
You will find charts online with a percentage for every month. Many are lender reproductions, and they do not always agree with each other. The official figure comes from the FHA system itself, run with your case number and projected closing date.
So treat any chart as a rough guide. The number on your lender's authorization is the one that counts.
A Worked Example, Using Percentages Only
Run the numbers on a borrower with an FHA loan who refinances into a new FHA loan with a different base amount. Here is how each line is built, with no dollar figures needed.
1. Original upfront premium on the old loan = 1.75% of the old base loan amount.
2. Credit = that original premium × the unearned share at the projected closing date.
3. New upfront premium = 1.75% of the new base loan amount.
4. Net upfront premium = line 3 minus line 2.
The same borrower, run at two different loan ages, shows the cost of waiting:
| Line | Earlier closing | Later closing |
|---|---|---|
| Original premium | Same | Same |
| Unearned share | Larger | Smaller |
| Credit | Larger | Smaller |
| New premium (same new loan) | Same | Same |
| Net premium owed | Smaller | Larger |
Notice what stays fixed and what moves. Only the unearned share changes with time. Everything else is set by the two loans.
One more wrinkle. If the credit exceeds the new premium, the extra does not come back to you as cash. And if your new loan is much smaller than the old one, the new premium is smaller, so the credit offsets more of it.
Which Refinances Get the Credit?
The credit exists inside the FHA-to-FHA system. Across the wholesale programs Lendmire places files with, this is how the main options line up:
| Refinance type | Credit netted? | What to know |
|---|---|---|
| FHA streamline | Yes | No appraisal, limited credit review, net tangible benefit |
| FHA rate-and-term | Yes, as new FHA loan | Appraisal; up to 97.75% on a home you occupied for the previous twelve months |
| FHA cash-out | Yes, as new FHA loan | Up to 80% LTV; owned and occupied 12 months before the case number |
| Conventional payoff | No | No FHA premium to net against |
The last row matters most for readers weighing a move out of FHA. The credit works only as a netting inside a new FHA case. Lendmire's piece FHA Loan to Conventional Refinance Requirements and the MIP Refund covers that path separately.
On the cash-out row, expect the lender to confirm eligibility in the FHA system, and the lender's authorization result settles it for your file.
How Your Lender Gets the Exact Number
You do not request the refund. The lender does the work.
First, the lender looks up your existing loan in the FHA system using your case number. HUD's refinance credit query returns the original mortgage amount, the original property value and the computed upfront premium on the loan being refinanced. For streamline cases it also returns a pricing LTV from the prior loan. That LTV helps set the premium factors for the new loan.
Second, the lender enters the projected closing date. The system calculates the unearned premium to that date and issues a refinance authorization number. Every FHA-to-FHA refinance needs one.
Third, the credit appears as a reduction in the new upfront premium. It lands on your loan figures, not in your mailbox.
A clean file helps. If your existing loan has an open repair escrow without the proper closeout certification, FHA will not issue a new case number. Fix that first.
Where the General Rule Breaks
Most borrowers fit the pattern above. These edge cases do not.
Very old loans. FHA loans from the late 2000s or earlier carry a nominal upfront premium on a streamline or simple refinance. For those loans, HUD's current premium guidance keeps the new upfront premium tiny, so the credit has little left to net against. The same guidance sets the standard upfront premium at 1.75% of the base loan amount on other FHA mortgages.
Long-held loans. The credit declines to zero over time. HUD's 1993 premium refund letter set the method still used in concept: the refund is a percentage of the initial premium paid, combined with the period of insurance. It applied the same method to refunds on prepayment and to netting on FHA-to-FHA refinances. It is a historical letter, and its old cutoff should not be applied to today's loans. Current factors come from HUD's system.
Streamline limits. Streamlines cannot roll closing costs into the new loan amount. They also cap the cash you can take at closing at a small amount. And the credit is subtracted when the lender sizes the maximum streamline loan. You can read these points on HUD's streamline refinance page.
Seasoning and benefit tests. Streamlines require you to be current, to have made a minimum number of payments, and to have held the loan for a minimum stretch. Net tangible benefit rules vary with the loan being refinanced and the new loan's term and type. Older figures online are stale. Your lender confirms current requirements.
Special subsidy loans. Certain older subsidized FHA loans carry extra requirements, such as repaying excess subsidy. If that is you, say so up front.
Assumed, modified or previously refinanced loans. The start of the insurance clock can differ on these. Ask the lender which date the system uses for your case. Don't guess.
What the Credit Does to Your Budget
The credit lowers the upfront premium that is normally financed into the new loan. A smaller premium means a slightly smaller balance, and that trims the payment a little.
It does not change the annual premium. That one depends on term, loan amount and LTV. On a thirty-year loan above 90% LTV, the annual premium lasts the full term. At or below 90%, it ends after eleven years. You pay it in monthly installments, and none of it is refunded. The exact numbers vary by lender and program and follow a full review of property, leverage, and credit.
So the credit helps at the start and does little afterward. That is worth remembering when someone describes it as a big win. It is a modest offset against one charge.
Is the Credit Worth Chasing?
Honestly, rarely by itself. The credit should be one line in your break-even math, not the reason to refinance.
Weigh these together:
- The change in your total monthly payment, including the annual premium
- Whether the new loan passes the net tangible benefit test, if it is a streamline
- What the new loan costs to close, since streamline costs cannot be rolled into the balance
- How long you plan to keep the home
- Whether timing moves the credit enough to matter
That last item is a toss-up in practice. A later closing date shrinks the credit, but waiting for the perfect moment can cost you in other ways. Run both dates through the lender's system and compare the net premium.
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.
If Your Lender's Number Differs From Yours
It will, at times. Check the usual suspects.
1. Projected closing date. A different date gives a different credit. Ask which date the lender entered.
2. Original premium. Confirm the figure against your original settlement paperwork. Some borrowers use the financed total rather than the premium itself.
3. Loan vintage. Older loans follow different premium treatment.
4. Base versus financed amount. The 1.75% applies to the base loan, not the base plus the financed premium.
5. Chart versus system. If you used an online chart, that is likely the gap.
Ask the lender for the refinance authorization result. It shows the credit and the date it was measured to. Then look at your Loan Estimate and Closing Disclosure to see where the lower upfront premium appears.
Frequently Asked Questions
Do I have to request the MIP refund?
No. Your lender gets the credit through the FHA system when it requests the refinance authorization. You should confirm that your Loan Estimate and Closing Disclosure show a reduced upfront premium. If you switch lenders mid-process, the new lender runs its own authorization.
Will I get a check for the unearned premium?
No. The credit is netted against the new loan's upfront premium. It is not paid out as cash. If the credit is larger than the new premium, the extra does not come back to you.
Is the monthly mortgage insurance refunded too?
No. The credit concerns only the upfront premium. The annual premium is collected monthly and passed to HUD, and none of it comes back when you refinance.
What if I refinance into a conventional loan?
The netting credit does not apply, because it works only inside a new FHA case. The upfront premium you paid is not returned as cash.
Does a cash-out FHA refinance get the credit?
The credit follows the new loan being FHA, so a cash-out FHA loan is normally an FHA-to-FHA refinance. The program limits still apply, including 80% LTV on a home owned and occupied for 12 months before the case number. Your lender's authorization result confirms the credit for your file. All terms are subject to lender guidelines and full file review, and nothing here is a commitment to lend.
For your own numbers, request a scenario review with Lendmire.
About Lendmire
Lendmire, NMLS# 2371349, is a mortgage brokerage with consumer lending licenses in 16 states. FHA, VA, conventional and jumbo purchase and refinance loans are arranged through wholesale lending partners, and each application is reviewed individually by the lender. Scotsman Guide named Lendmire a Top Mortgage Workplace in both 2025 and 2026.
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References
1. HUD FHA Connection, Refinance Authorization Results field descriptions
2. HUD FHA Connection, Refinance Credit Query field descriptions
3. HUD Mortgagee Letter 2023-05
4. HUD Mortgagee Letter 93-36, Changes in Premium Refund Computations
5. HUD Streamline Refinance page
This article is part of Lendmire’s FHA loan program — full qualification details, guidelines, and scenarios live on the program page.
Related reading: How to Refinance Out of FHA Mortgage Insurance on a Low Appraisal · How to Refinance an Existing FHA Loan Into Conventional · How to Show the Benefit on a Refinance That Drops FHA Mortgage Insurance
Brandon Miller
Founder & CEO, Mortgage Loan Originator, Lendmire LLC
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Compliance and disclosures. Lendmire (NMLS# 2371349) is a licensed mortgage broker and is not a direct lender, depository institution, financial advisor, or tax professional. Content in this article is general market analysis and educational information — not financial, legal, or tax advice for any specific situation. Lendmire does not guarantee loan approval; every transaction is subject to underwriting by the funding lender. Mortgage pricing and loan program guidelines are subject to change at any time without notice and vary by borrower characteristics, property type, and state regulations. Lendmire complies with Equal Housing Opportunity. Licensure verification: NMLS Consumer Access.