A Guide To The FHA MIP Refund Chart

There are plenty of benefits of an FHA loan. These loans, insured by the U.S. Federal Housing Administration, require a lower down payment, as low as 3.5% of a home's final purchase price depending on your FICO® credit score.

But these loans aren't free. You'll have to pay both an annual and upfront mortgage insurance premium (MIP) with an FHA loan. But the good news is that you might qualify for a partial refund of the upfront mortgage insurance premium fee if you refinance your existing loan into another FHA loan.

And you can find out how much of a refund you might be getting by checking the FHA MIP Refund Chart.

If you are relying on an FHA loan to finance the purchase of a home, you’ll have to pay two types of mortgage insurance premiums.

One of these is your annual MIP. On most FHA loans, you'll pay an annual MIP fee equal to 0.85% of your loan amount. If you borrow $200,000, that comes out to $1,700 a year or about $142 a month.

You also pay a one-time upfront MIP. That fee is 1.75% of your loan amount. On that $200,000 loan, then, you'd pay $3,500.

You will qualify for a refund of your upfront MIP payment, though, if you refinance your FHA loan to another FHA loan within 3 years of obtaining your mortgage. How much you get back, though, depends on how quickly you refinance. The sooner you refinance, the more you’ll get back. And if you don’t refinance within 3 years, you won’t receive any refund of your upfront MIP.

How much of an FHA MIP refund will you receive if you refinance your FHA loan to another loan insured by the Federal Housing Administration? That depends mostly on how long you wait until you refinance.

If you refinance your FHA loan within 12 months, you’ll receive a refund of 58% of your upfront payment. If you wait until 3 years to refinance, you’ll receive a refund equal to just 10% of your upfront payment.

You won’t receive your refund as a cash payment. Instead, your refund will be applied to the upfront MIP payment you need to make when you refinance to a new FHA loan. The refund, then, reduces the size of your new MIP upfront payment. The FHA does not allow borrowers to ever receive an MIP refund as cash.

The percentage you are refunded – and the amount by which you can reduce the upfront MIP payment on your new FHA loan – drops steadily the more months you wait to refinance. Don’t, though, let the lure of a partial MIP refund persuade you to refinance before you’re ready. If your interest rate is already low, and you are happy with your loan’s term and monthly payment, it might not make sense to refinance, no matter how much of an MIP refund you might receive.

Not everyone qualifies for an FHA MIP refund. If you’re refinancing an FHA loan, here’s what you need to get your refund:

• You must have closed on your FHA loan less than 3 years ago.
• You must be current on your mortgage payments.
• You can’t have any foreclosures listed on your credit report.
• You can’t refinance your existing FHA loan into any other type of loan. You can only get an MIP refund if you refinance your loan into another FHA mortgage.

You can’t request a refund of your upfront MIP payment on your own. Instead, your lender will handle this process. Your refund will automatically be applied to the upfront MIP payment due when you refinance to your new FHA loan.

Want to know how much of an FHA MIP refund you might get? Try this formula: Take your original MIP amount and multiply it by your refund percent. That will give you your FHA MIP refund amount.

Say you took out an FHA loan for $200,000. Your original upfront MIP will be 1.75% of that amount, or $3,500. Now say that you will close your refinance 25 months after closing on your original FHA loan. If you check the FHA MIP refund chart, you see that you'll qualify for a refund of 32% of your MIP upfront payment.

Now multiply your $3,500 of upfront MIP payment by 32%. You'll get $1,120, which is the refund that will be applied against the upfront MIP payment of your new FHA loan.

Getting an MIP refund shouldn’t be your main goal when refinancing. What matters most when refinancing is whether you can swap your existing loan for one with a lower interest rate or a term that best fits your needs. If you’re ready to make this move, you can get started on a refinance of your loan.