When FHA mortgage insurance comes off
On an FHA loan with a case number assigned on or after June 3, 2013, annual mortgage insurance lasts 11 years or the life of the loan. The split is the loan-to-value ratio at the start, not the balance you reach later.
FHA mortgage insurance is a premium the Federal Housing Administration charges for insuring the loan. It has two parts. The upfront premium is a percentage of the base loan amount, collected at closing or added to the loan. The annual premium is paid monthly. “Removal” is a question about the annual premium. The upfront premium is not cancelled by a later drop in the balance. The FHA MIP calculator applies HUD’s table for the rate and the duration. This page is about which duration applies, and why paying the balance down does not move it.
The duration is fixed at the start
HUD Mortgagee Letter 2013-04 changed the period for which FHA collects the annual premium. For case numbers assigned on or after June 3, 2013, FHA collects the annual premium for the longest period the statute allows. When the original principal obligation, excluding any upfront premium that was financed, is at or below 90 percent of value, the annual premium is assessed until the end of the mortgage term or for 11 years, whichever comes first. When that original loan-to-value ratio is above 90 percent, the annual premium is assessed until the end of the mortgage term or for 30 years, whichever comes first. On a 30-year loan, that second case is the life of the loan.
HUD’s letter is explicit about the value in that ratio. It is the loan amount before any financed upfront premium, divided by the lesser of the purchase price and the appraised value. A later appraisal that shows a higher value does not rewrite the ratio. Extra principal payments do not rewrite it either. The 11-year clock and the life-of-loan case are both assigned from the original numbers. Mortgagee Letter 2023-05 changed the annual premium rates for case numbers endorsed on or after March 20, 2023. It did not restore a cancellation that depends on the balance falling to a percentage of value.
The letter also describes what it replaced. Before that change, many loans had the annual premium cancelled when the balance reached 78 percent of the original value, sometimes with a minimum number of years. FHA remains responsible for the insured balance after the premium stops, which is the reason the letter gives for collecting longer. Loans with case numbers assigned before June 3, 2013 can still be on the earlier rule. The case-number date, not the date you ask, decides which schedule applies. This page’s calculator uses the post-2013 durations in HUD’s current table.
Eleven years is not 78 percent
Borrower-paid private mortgage insurance on a conventional loan follows a different statute. The Homeowners Protection Act lets you request cancellation at 80 percent of the original value and requires the premium to end at 78 percent of that value if you are current. That statute is not the FHA premium. A borrower who asks an FHA servicer to drop annual MIP because the balance has reached 78 percent is applying the conventional rule to a premium that does not use it.
The practical split on a purchase is the down payment that gets the base loan to 90 percent of value. A down payment of 10 percent of the price produces a base loan-to-value ratio of 90 percent, which is the 11-year side of the line, before the upfront premium is considered. A smaller down payment, including the 3.5 percent minimum on many FHA purchases, produces a ratio above 90 percent, which is the life-of-loan side on a term longer than 15 years. Financing the upfront premium increases the balance you pay interest on. HUD says the duration test uses the base loan, excluding that financed premium. Adding the premium into the ratio can push a loan that is exactly at 90 percent onto the wrong side of the line. The calculator follows HUD’s base-loan test.
Terms of 15 years or less have their own annual rates in the same HUD table. The duration rule in Mortgagee Letter 2013-04 still uses the 90 percent line for every amortization term: 11 years at or below 90 percent, and the term (or 30 years, if that is sooner) above it. A 15-year loan above 90 percent does not get the old cancellation at 78 percent. The PMI and MIP guide sets the two premiums next to each other. The PMI removal calculator is only for the conventional statute.
Worked example
Both loans are a $280,000 price, a 6.5 percent note rate, and a 30-year term, with the upfront premium financed. The rate is an input, not a quote. The first down payment is $9,800. The second is $28,000. Annual MIP below uses the calculator, which applies HUD’s table only when the base loan is within the threshold printed in that table.
- Down payment $9,800. Base loan $270,200. Loan-to-value ratio $270,200 ÷ $280,000 = 96.5%. That is above 90 percent, so the annual premium is charged for the life of the loan. Upfront premium $4,728.50. First-year monthly MIP $123.21 at 0.55%. Over the years it is charged, the annual premiums add up to $29,160.
- Down payment $28,000. Base loan $252,000. Loan-to-value ratio 90%, which is at the 90 percent line. The annual premium is charged for 11 years. Upfront premium $4,410.00. First-year monthly MIP $104.47 at 0.5%. The annual premiums over those years add up to $12,808.
The second loan’s annual premium stops after 11 years even if the balance is still above 78 percent of the original value. The first loan’s annual premium continues for the term even if extra payments push the balance under 78 percent, or under 80 percent, in year seven. The monthly amount itself does decline as the scheduled balance declines, because HUD computes each year from that year’s average balance. The end date does not move with it.
Paying the upfront premium in cash, instead of financing it, changes the interest you pay and the cash due at closing. It does not change the base loan amount, so it does not change which duration row you are in. A refinance into a new loan is a new case number and a new ratio. That is a different transaction, with its own upfront premium if the new loan is FHA, or with conventional mortgage insurance if the new loan is conventional and still above 80 percent. The refinance calculator counts closing costs against the payment change. It does not decide whether a servicer will drop FHA insurance in place.
What this does not cover
HUD excludes some programs from the ordinary premium table, including Home Equity Conversion Mortgages and certain streamline refinances of FHA loans endorsed on or before May 31, 2009. The calculator’s limits section names the exclusions. A case number from before June 3, 2013 needs the letter’s earlier schedule, not the 11-year and life-of-loan split. The price in the example stands in for value. If the appraisal comes in lower than the price, HUD’s ratio uses the lower number, and a loan that looked like 90 percent can land above it.
The annual rates in the table have changed over time. Duration and rate are separate. A page that quotes a monthly premium from an old letter can be wrong on the dollars and still right on whether the premium lasts 11 years. The calculator reads the rates from the table this site keeps with HUD’s letters. If that table and HUD disagree, HUD’s document is the one that governs the loan.