The FHA said the upfront portion of the mortgage insurance premium (UFMIP) paid is not refundable. But there is an exception to this rule: when you refinance into another FHA mortgage. This UFMIP refund is very beneficial because it reduces the UFMIP on your new loan, lowering your base loan amount and your monthly payment in turn.
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UFMIP Refund When Refinancing
If you are an existing FHA homeowner and refinancing into another FHA loan through a streamline, simple or cash-out refinance within three years of the date of closing, you can receive a refund credit. The UFMIP refund is usually applied to the UFMIP on your new mortgage.
The UFMIP refund can range between 10 and 68% of your original UFMIP paid. Why not 80% you ask? It’s because the FHA streamline refinance has a seasoning requirement, namely:
- At least six full months have passed since you made your first payment on your FHA loan.
- You have made six monthly payments on his/her mortgage.
- It’s been 210 days since the closing date of the mortgage.
- If you have assumed your FHA mortgage, you must have made six payments since the mortgage assumption date.
This table shows the percentage of your UFMIP refund depending on how soon you refinance within the three-year window, as lifted from the HUD’s Handbook.
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Upfront Mortgage Insurance Premium Refund Percentages |
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| Year |
Month of Year |
|||||||||||
| 1 | 2 | 3 | 4 | 5 | 6 | 7 | 8 | 9 | 10 | 11 | 12 | |
| 1 | 80 | 78 | 76 | 74 | 72 | 70 | 68 | 66 | 64 | 62 | 60 | 58 |
| 2 | 56 | 54 | 52 | 50 | 48 | 46 | 44 | 42 | 40 | 38 | 36 | 34 |
| 3 | 32 | 30 | 28 | 26 | 24 | 22 | 20 | 18 | 16 | 14 | 12 | 10 |
UFMIP on Streamline Refinances
The FHA collects a one-time mortgage insurance premium every time you take out an FHA loan, also known as the UFMIP. The going UFMIP rate on FHA loans is 1.75% of the base loan amount or 175 basis points.
This however is not applicable to streamline and simple refinances used to refinance mortgages endorsed on or before 31 May 2009 whereby the UFMIP will be 1 basis point or 0.01% of the base loan amount. In cases like this, the refund may not be applicable because it will be greater than the new UFMIP cost.
To be safe and clear, ask your lender about your entitlement to an UFMIP refund. Don’t drag your feet for your refund may be diminished if you wait too long. Also, make sure you are qualified for an FHA streamline refinance.