FHA, mortgage insurance premium

Cancelling FHA Mortgage Insurance
October 12, 2002, Reviewed December 12, 2007, Revised November 20, 2013

The following FHA insurance premium cancellation rules apply to FHA mortgages closed after December 31, 2000 but before June 3, 2013.

FHA's annual mortgage insurance premiums are automatically canceled once the unpaid principal balance, excluding the upfront premium, reaches 78% of the lower of the initial sales price or initial appraised value. The 78% is based on the initial amortization schedule, and does not take account of extra payments. This cancellation rule applies only to FHA's mainstream insurance program. It does not cover mortgages on condominiums or Section 203(k) rehabilitation loans, among others.

Borrowers who make additional payments to principal must take the initiative, through their lender, to have the insurance terminated using the 78% rule. The insurance must to be in force for at least 5 years.

On loans closed June 3, 2013 and thereafter, there is no way to stop  paying FHA insurance premiums except by paying off the loan balance completely.

For cancellation rules on private mortgage insurance, see Cancelling Private Mortgage Insurance (2).
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