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Can I Cancel My Mortgage Insurance?
Question: Can I get rid of my monthly FHA mortgage insurance payments? I believe my HUD case number was assigned before June 3, 2013, even though my loan closed after that date. How do I find the case number and date for certain? My loan is 14 months old, and my appraisal qualifies the 78-percent loan-to-value. Does this mean I qualify for MIP removal?
Answer: Like most issues regarding FHA financing, canceling the mortgage insurance premium – the MIP – is not simple.
The cancellation rules for FHA loans with 3.5 percent down and a 30-year term differ from the rules for 15-year FHA loans and loans with at least 10 percent down. Also there are different standards for FHA-insured reverse mortgages and Title I financing. And – to make matters more confusing – dates also count.
The first thing you want to know is the case number and when it was issued. To find this information call the FHA Resource Center Center at 1-800-225-5342.
The magic date you want to find is June 3, 2013, because that’s when FHA cancellation policies changed.
The Old Rules
Let’s assume that like most FHA borrowers you bought property with 30-year financing and less than 5 percent down. For FHA loans issued between Jan. 1, 2001, and June 2, 2013, the cancellation rule looks like this:
1. The annual MIP automatically will be canceled when the outstanding balance reaches 78 percent of the original debt.
2. To be eligible for automatic cancellation, the monthly MIP must have been paid for a minimum of five years (60 months).
3. According to HUD, “cancellation of the annual MIP is normally based on the scheduled amortization of the loan. However, in cases where the loan payments have been accelerated or modified, cancellation can be based on the actual amortization.” If you have been prepaying your mortgage, you may be able to cancel MIP more quickly but not before five years have passed.
The New Rules
According to HUD, under the new rules things are different for loans with FHA case numbers assigned on or after June 3, 2013.
1. If the loan term is more than 15 years and the original loan-to-value ratio was 90 percent or more, you cannot cancel the mortgage insurance. It runs with the loan and only ends after 30 years or when the mortgage is paid off. Since most people use 30-year FHA financing and buy with 3.5 percent down this is the rule that most likely applies.
2. If you bought with at least 10 percent down and financed with a 30-year mortgage you can cancel after 11 years.
For details and specifics regarding your loan contact your mortgage servicer – the folks who collect the monthly payments.
Peter G. Miller is the author of The Common-Sense Mortgage and a veteran real estate columnist. Have a question? Please write to firstname.lastname@example.org.View Foreclosure Article Archives
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