HUD announced in Mortgagee Letter 2015-01 that certain FHA loans have the opportunity to have their mortgage insurance reduced. Basically certain FHA loan borrowers can refinance their FHA loan and receive a FHA mortgage insurance reduction.
What does this mean?
For those of you who are currently on a FHA loan (and don’t have VA entitlement) have an extremely unique opportunity to refinance into a new FHA loan and take advantage of paying less mortgage insurance each month. Below is a graph that outlines the change:
|Loan Amount||LTV (%)||Previous||NEW|
|<= $625,500||<= 95%||130 bps||80 bps|
|<= $625,500||> 95%||135 bps||85 bps|
|> $625,500||<= 95%||150 bps||100 bps|
|> $625,500||> 95%||155 bps||105 bps|
To illustrate this, let’s take a $200,000 loan where the Loan To Value is 94.5%. A recent FHA borrower would be paying 130 bps, equivalent to $216.67 per month. With this new change, this same person would be paying $133.34 which is $83.33 a month savings strictly from mortgage insurance!
Remember the keyword “certain FHA loans” in the first sentence of this post? Well, not everyone with a FHA loan can refinance to take advantage of the mortgage insurance reduction. The loan term has to be greater than 15 years, excluding streamline refinances that are refinancing existing FHA loans that were endorsed on or before May 31, 2009.
Now is a great time for anyone that is in a FHA loan to seriously consider looking at refinancing to take advantage of this FHA MI change. With rates at historical lows and FHA mortgage insurance slashed, the world is begging you to start saving money today!
United Services Veterans Mortgage also offers FHA Mortgage Loans.