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What Is The FHA MIP Refund Chart And How Is It Relevant To My FHA Refinance?

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Published on August 15, 2022
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Mortgage insurance is part of the cost of buying a home for many people. While mortgage insurance is an additional cost, there’s good news: homeowners may be entitled to a partial refund on their initial FHA loan if they successfully apply for an FHA Streamline refinance. The FHA MIP refund chart has more details on the amount of refund borrowers working with these two loan products can expect to receive. Let’s start by talking about what an FHA MIP refund is, then break down how you can get one.

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What Is An FHA MIP Refund?

FHA home loans are a great option for purchasing a home with less than 20% down, making homeownership more attainable. Because of the low down payment requirements, borrowers have to pay two types of mortgage insurance when utilizing any FHA loan to finance a home purchase:

  • Upfront Mortgage Insurance Premium (UFMIP):75% of the loan amount, due up front at the time of closing. Borrowers can choose to finance this amount and bring less cash to closing.
  • Annual Mortgage Insurance Premium (MIP): Your annual premium, spread out over 12 months in a year and added to your monthly mortgage payment. The amount is determined by how much you put down. The more money you put down, the less mortgage insurance premium you pay.

All FHA borrowers have to pay these two types of mortgage insurance, with the caveat that the homeowners who refinanced their original FHA loan into an FHA streamline refinance may be eligible for an MIP refund.

What Is An FHA Streamline Refinance?

An FHA Streamline refinance is a mortgage refinance backed by the Federal Housing Administration (FHA). An FHA Streamline Refinance offers some benefits in that it allows you to refinance without an appraisal and take quickly take advantage of lower interest rates.

As with every FHA loan, homeowners who close on their FHA Streamline refinance must paya new upfront MIP and continuing to make monthly MIP payments. The MIP refund can help to take some of the financial “sting” out of having to make these payments for a second time.

Who’s Eligible For An FHA MIP Refund?

As with any FHA loan product, there are requirements to qualify. To qualify for the FHA MIP refund you must meet these requirements

  • The refinance must result in a net tangible benefit to the borrower (discussed below)
  • Borrower must have closed on their FHA loan less than 3 years ago
  • Borrower must be up-to-date on mortgage payments
  • No previous foreclosures
  • Borrower must be refinancing into another FHA loan

Do I Get A Cash Refund Of My Previous Upfront Mortgage Insurance Payment (MIP)?

Whenever anyone hears the word “refund,” they likely think of something similar to a tax refund from the IRS that comes in the form of a check during tax season. The MIP refund isn’t a cash refund you receive in the mail or at the closing. Instead, the MIP refund is a credit that gets applied to the upfront MIP (UFMIP) charge on your new mortgage.

The refund shouldn’t be seen as an incentive to complete an FHA refinance. Rather, think of it as a reduction on the cost of a refinance you’d be doing anyway. An FHA refinance should only be utilized if it makes the most financial sense for the borrower, regardless of the MIP refund.

FHA Streamline Refinance MIP Refund Chart

The amount of the refund you receive will be a percentage of your original MIP, with the percentage being determined by how long you had your original FHA mortgage. The longer you have your original FHA mortgage, the less of a refund you can expect to receive on your refinance.

Months After Closing

MIP Refund

Months After Closing

MIP Refund

Months After Closing

MIP Refund

1

80%

13

56%

25

32%

2

78%

14

54%

26

30%

3

76%

15

52%

27

28%

4

74%

16

50%

28

26%

5

72%

17

48%

29

24%

6

70%

18

46%

30

22%

7

68%

19

44%

31

20%

8

66%

20

42%

32

18%

9

64%

21

40%

33

16%

10

62%

22

38%

34

14%

11

60%

23

36%

35

12%

12

58%

24

34%

36

10%

How To Calculate Your MIP Refund

Using the chart above for reference, let’s work out some real-life examples of the type of MIP refund a homeowner could expect to receive.

For all the examples below, we’re going to use the example of a homeowner who bought a $260,000 home with a 5% down payment. This gives us a total mortgage of $247,000. Since all FHA borrowers pay 1.75% in upfront MIP, this example homeowner paid UFMIP of $4,323 at closing. The monthly MIP costs is $164 with a cost factor of 0.80%.

Mortgage Age In Months

% of refund

Amount of refund = $4,323 ✕ % of refund

Refinance amount (based on mortgage amortization)

New MIP = amount of new loan ✕ 1.75%

New Upfront MIP = New MIP − MIP Refund

New Monthly MIP

12

58%

$2,507.34

$243,349.27

$4,258.61

$1,751.27

$162.23

24

34%

 $1,469.82

$239,512.15

$4,191.46

$2,721.64

$159.67

36

10%

$432.30

$235,479.11

$4,120.88

$3,688.68

$156.99

Find out if an FHA loan is right for you.

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Net Tangible Benefit: Does An FHA Refinance Make Sense?

Because refinancing a loan does come with a new set of underwriting and loan costs, it is important for each individual to run the numbers to ensure an FHA refinance would make sense for their individual circumstances. Usually this means refinancing to a loan with a lower interest rate.

But just because you can and do meet eligibility requirements doesn’t mean this is the right financial product for you. Refinancing only makes sense when homeowners receive a net tangible benefit. This means they’d recoup the cost of the loan refinance and enjoy savings over the life of the loan.

Downsides To Streamline Loans

FHA Streamline Refinance loans are just one option available to homeowners seeking to refinance their home loan. There are, however, a handful of drawbacks to the FHA Streamline refinance:

  • 7 month waiting period from date of original closing to ability to apply for FHA Streamline
  • Homeowners can’t get more than $500 cash back at closing, so they will need to factor in cash out-of-pocket for most closing costs
  • As with any new FHA loan, you’ll also have to pay another upfront MIP and monthly MIP, even if you have 20% equity in your home.

With these limits, it’s best to run the financials to see if refinancing to an FHA specific product is the best deal.

Alternatives To Streamline Loans

There are many alternatives to the FHA streamline loan, conventional mortgages being chief among them. For homeowners approaching 20% home equity (or a loan-to-value ratio of 80% or less) you may save more by refinancing to a conventional conforming mortgage loan to avoid paying mortgage insurance altogether. This is because once a borrower reaches 20% equity in the home, conventional lenders no longer require private mortgage insurance.

To determine which scenario saves you more money, do your financial homework. Calculate how much refinancing to a conventional mortgage would save you on a monthly basis and how much you’d need to bring to closing. Then use our FHA MIP Refund Chart to determine your New Upfront MIPs and New Monthly MIP calculations to ascertain how much you’d save at closing and on a monthly basis by moving out of your current FHA loan.

Can I Roll My New Upfront MIP And Other Closing Costs Into My FHA Refinance?

No, you must pay the upfront mortgage insurance premium (UFMIP) at closing, which is where the MIP refund can really help to reduce costs. With the Streamline refinance, the upfront mortgage insurance premium is the only closing cost that can be financed into the loan. For those low on cash, or for those who want to keep more cash on-hand to better weather times of economic volatility, rolling UFMIP costs into your loan refinance can be a savvy money move.

The Bottom Line: Homeowners Completing An FHA Streamline Refinance Might Benefit From A MIP Refund

If you’re a current FHA loan holder and want to refinance to the FHA streamline, you could benefit from the MIP refund credit, which applies to your new upfront MIP. Bear in mind, even with the MIP refund, you may save more money by considering other mortgage options that could free you monthly MIP payments altogether – particularly if you have a substantial amount of equity in the home.

When it comes to refinancing your mortgage, knowledge is key. To begin to see how a refinance can benefit you, apply online today.

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Lauren Bowling

The Quicken Loans blog is here to bring you all you need to know about buying, selling and making the most of your home. Whether you’re thinking about becoming a homeowner, selling your current home or looking to keep your place in tip-top shape, our writers and freelancers bring their experience and expertise to meet you right where you are.