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In the
past, some FHA borrowers have paid annual mortgage insurance
premiums throughout the life of their mortgages.
For all loans closed before January 1, 2001, you are
out of luck. The only way to remove the mortgage insurance is
to pay off the loan or refinance the mortgage.
Effective for all loans closed on or after January 1, 2001,
FHA's annual mortgage insurance premiums will be automatically
canceled under the following conditions:
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For mortgages with terms more than 15 years, the annual
mortgage insurance premiums will be canceled when the loan to
value ratio reaches 78 percent, provided the mortgagor
has paid the annual mortgage insurance premiums for at least
five years.
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For mortgages with terms 15 years and less and with
loan to value ratios 90 percent and greater, the annual
mortgage insurance premiums will be canceled when the loan to
value ratio reaches 78 percent, irrespective of the length of
time the mortgagor has paid the annual mortgage premiums.
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Mortgages with terms 15 years and less and with loan to
value ratios of 89.99 percent and less will not be charged
annual mortgage insurance premiums.
Although the annual mortgage insurance premiums will be canceled
as described, the contract of insurance will remain in force for
the loan's full term. This mortgage insurance premium
cancellation provision only applies to loans in the MMI fund.
FHA
will determine when a borrower has reached the 78% loan to value
ratio based on the lower of the sales price or appraised value
at origination. New appraised values will not be considered. For
example, if the lower of the sales price or the appraised value
at origination was $100,000, when the loan amount reaches
$78,000, FHA will no longer collect annual mortgage insurance
premiums on the loan. Cancellation of the annual mortgage
insurance premiums will normally be based on the scheduled
amortization of the loan.
In
cases where the borrower has made additional principal payments
may request cancellation of his/her mortgage insurance if the
loan to value ratio has reached 78 percent, has paid mortgage
insurance for at least five years and has not been delinquent
for more than 30 days at anytime within the prior 12 months.
Other conditions may apply.
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