Refinance FHA to conventional: how to drop MIP for good
Yes, you can refinance an FHA loan into a conventional loan, and it is the most common way to stop paying FHA mortgage insurance (MIP). If you put less than 10% down, FHA charges MIP for the life of the loan, while private mortgage insurance on a conventional loan is never required at 80% loan-to-value or less and must end by 78% under federal law.
Whether it saves money depends on your equity, your current rate and today’s rates. Below: how long MIP lasts, the 20% equity math, how PMI ends, and a worked example at four FHA rates. If the numbers point to a refinance, LenderMatch lets you ask several lenders at once and compare their offers.
How long does FHA mortgage insurance last?
FHA loans carry two premiums: an upfront premium of 1.75% of the base loan amount, usually rolled into the loan, and an annual premium (MIP) paid monthly with your mortgage. How long the annual premium lasts depends on your loan-to-value (LTV) at the start, not on how much equity you build later. HUD’s current table, from Mortgagee Letter 2023-05, sets these rules for loans of $726,200 or less with terms over 15 years:
| LTV at the start | Annual MIP | How long |
|---|---|---|
| 90% or less (10%+ down) | 0.50% | 11 years |
| Over 90% to 95% | 0.50% | Full mortgage term |
| Over 95% (3.5% down) | 0.55% | Full mortgage term |
Source: HUD Mortgagee Letter 2023-05, effective for case numbers endorsed on or after March 20, 2023. Larger loans and terms of 15 years or less have their own rates. We found no later HUD change to the single-family annual MIP as of October 22, 2026.
The common FHA purchase with 3.5% down starts above 95% LTV, so it lands in the last row: 0.55% a year until the loan is paid off. Paying the balance down does not change that. The PMI cancellation rules covered below do not help here either: the CFPB says FHA and VA loans have different mortgage insurance requirements and tells borrowers to ask their servicer.
How to get rid of MIP on an FHA loan
There are only a few ways out:
- Wait it out, if your loan started at 90% LTV or less. MIP ends after 11 years.
- Refinance into a conventional loan. A conventional loan has no FHA premium. If the new loan is at 80% of the home’s value or less, it needs no mortgage insurance at all.
- Sell the home or pay off the loan.
An FHA streamline or other FHA-to-FHA refinance can lower your rate, but the new loan still carries MIP.
How much equity do you need to refinance from FHA to conventional?
Fannie Mae requires mortgage insurance on a conventional first mortgage when the LTV is above 80%. So the target is simple: the new loan, including any closing costs you add to it, at or below 80% of the appraised value.
Value you need = new loan amount ÷ 0.80
If you owe $300,000 and pay closing costs in cash, the home needs to appraise for at least $375,000. Roll $9,000 of costs into the loan and the new balance is $309,000, so you need an appraisal of $386,250. Rising home values can be what makes the switch possible, because the refinance is based on a new appraisal, not your purchase price. The home equity calculator shows your current LTV from your home value and balance.
Below 20% equity you can still refinance to conventional, with PMI. Fannie Mae allows a rate-and-term refinance above 95% LTV only when it already owns the loan being paid off, which an FHA loan is not, so the practical ceiling is 95%.
When does PMI go away on a conventional loan?
This is the real difference between the two kinds of mortgage insurance. Under the Homeowners Protection Act, for a home you live in, PMI on a conventional loan has an end date:
- At 80%, on request. You can ask your servicer in writing to cancel PMI once the balance reaches 80% of the original value, on schedule or by paying extra. You need a good payment history and may need to show the value has not dropped.
- At 78%, automatically. The servicer must end PMI when the balance is scheduled to reach 78% of the original value, as long as you are current.
- At the midpoint. PMI must end the month after the loan reaches the halfway point of its schedule (15 years on a 30-year loan), even above 78%.
For a refinance, the law defines “original value” as the appraised value the lender relied on for the refinance. So if your $360,000 refinance appraisal supports a $324,000 loan (90% LTV), you can ask to cancel PMI at a $288,000 balance and it ends on its own at $280,800, instead of paying FHA MIP for 30 years.
Is it worth refinancing from FHA to conventional? A $300,000 example
Say you owe $300,000 on an FHA loan with 27 years left, your home appraises at $400,000 (75% LTV), and you pay 0.55% annual MIP, about $137.50 a month at this balance. You refinance into a 30-year conventional loan at 7.32%, Freddie Mac’s average for the week of October 22, 2026, with no PMI because the LTV is under 80%. You pay $9,000 in closing costs (3%, the low end of Freddie Mac’s 3% to 6% estimate) in cash.
| Your FHA rate | FHA with MIP | Conventional | Monthly change |
|---|---|---|---|
| 6.00% | $2,009 | $2,061 | +$51 |
| 6.50% | $2,104 | $2,061 | −$43 |
| 7.00% | $2,201 | $2,061 | −$140 |
| 7.50% | $2,300 | $2,061 | −$239 |
Principal, interest and MIP calculated by LenderMatch; taxes and insurance not included. The conventional rate is a national average, not a quote. MIP is estimated at 0.55% of the current balance.
Closing costs divided by monthly savings gives the break-even point:
- At 7.50%: $9,000 ÷ $239 is about 38 months, a little over three years.
- At 7.00%: about 64 months, or five and a half years.
- At 6.50%: about 208 months, more than 17 years.
- At 6.00%: the new payment is higher, even with the MIP gone.
Also weigh the term: a new 30-year loan runs three years longer than the 27 you had left. A 15-year conventional loan at 6.68% (Freddie Mac, same week) would cost about $2,643 a month on $300,000 but pays the home off far sooner. And if your FHA rate is low, the MIP is the price of keeping that rate.
The refinance calculator runs this break-even on your own numbers, and today’s mortgage rates shows the latest averages. For the broader question of when any refinance pays off, see when refinancing makes sense.
Find your break-even before you apply.
Enter your FHA payment, including MIP, in the refinance calculator and compare it with a conventional quote.
Requirements to refinance from FHA to conventional
The new loan has to meet conventional rules, usually Fannie Mae or Freddie Mac guidelines:
- Credit score. Fannie Mae’s Selling Guide (section dated April 22, 2026) sets no minimum score for loans run through its Desktop Underwriter system, and a 620 minimum for manually underwritten fixed-rate loans. Lenders often set their own minimums above that.
- Equity and appraisal. 80% LTV or less to skip PMI, up to 95% with PMI when the loan being paid off is an FHA loan.
- Waiting period. A rate-and-term (limited cash-out) refinance has no minimum loan age in Fannie Mae’s guide, as long as a borrower is on title at application and the home is not listed for sale. Taking cash out requires a first mortgage at least 12 months old; see cash-out refinance seasoning.
- Cash back limit. On a limited cash-out refinance, you can receive no more than the greater of 1% of the new loan or $2,000.
If you plan to compare several lenders, our guide to whether rate shopping hurts your credit explains how scoring models treat multiple mortgage inquiries.
Cost to refinance FHA to conventional
Freddie Mac estimates refinance closing costs at 3% to 6% of the loan principal, covering items such as the appraisal, title services, origination and underwriting fees, credit report, recording costs and attorney fees. On $300,000 that is $9,000 to $18,000.
Do not count on getting part of your FHA upfront premium back. Since a 2005 change to the National Housing Act, FHA refunds unearned upfront premium only as a credit toward a new FHA-insured loan within three years. A refinance into a conventional loan does not qualify.
Refinance FHA to conventional with cash out
Taking cash out in the same refinance changes the rules. Fannie Mae’s Eligibility Matrix (August 5, 2026) caps a cash-out refinance on a one-unit primary home at 80% LTV, and the first mortgage being paid off must be at least 12 months old. If you only want cash and your FHA rate is low, a HELOC leaves the first mortgage alone; see cash-out refinance vs HELOC.
Frequently asked questions
Can you remove MIP from an FHA loan without refinancing?
Only if your loan started at 90% loan-to-value or less, in which case annual MIP ends after 11 years under HUD’s current table. Above 90%, it lasts the full term, and the ways out are refinancing out of FHA, selling or paying the loan off.
How much equity do I need to refinance from FHA to conventional?
To skip private mortgage insurance, at least 20%: the new loan, including any closing costs you roll in, at or below 80% of the appraised value. With less equity you can still refinance, up to 95% loan-to-value on a Fannie Mae rate-and-term refinance, but with PMI until you reach the cancellation point.
How soon can I refinance from FHA to conventional?
For a rate-and-term (limited cash-out) refinance, Fannie Mae’s Selling Guide sets no minimum loan age; at least one borrower must be on title when you apply. If you also want to take cash out, the first mortgage being paid off must be at least 12 months old. Lenders may add their own waiting periods.
Do I get my FHA upfront MIP back if I refinance to conventional?
No. Since the National Housing Act was amended in 2005, FHA refunds unearned upfront premium only as a credit when you refinance into another FHA-insured loan within three years. A refinance into a conventional loan does not qualify.
Does LenderMatch check my credit?
No. LenderMatch never pulls your credit. A lender you choose may check it, with your permission, when you apply.
Compare refinance offers from several lenders →
Sources
- HUD, Mortgagee Letter 2023-05, Reduction of FHA Annual Mortgage Insurance Premium Rates (February 22, 2023): annual MIP rates and duration, 1.75% upfront premium.
- HUD Handbook 4155.2, Chapter 7, Mortgage Insurance Premiums (change date March 1, 2011): elimination of upfront MIP refunds under National Housing Act sec. 203(c)(2)(A), as amended in 2005, except for refinances into another FHA-insured loan within three years.
- Homeowners Protection Act, 12 U.S.C. 4901 (definitions of cancellation date, termination date, midpoint and original value) (accessed October 22, 2026).
- CFPB, “When can I remove private mortgage insurance (PMI) from my loan?” (last reviewed August 28, 2026).
- Fannie Mae Selling Guide B7-1-01, Provision of Mortgage Insurance (04/02/2025); B2-1.3-02, Limited Cash-Out Refinance Transactions (10/08/2025); B2-1.3-03, Cash-Out Refinance Transactions (12/10/2025); B3-5.1-01, General Requirements for Credit Scores (04/22/2026); Eligibility Matrix (August 5, 2026).
- Freddie Mac, “Understanding the costs of refinancing” (accessed October 22, 2026): 3% to 6% of loan principal.
- Freddie Mac, Primary Mortgage Market Survey: 30-year fixed 7.32%, 15-year fixed 6.68%, week of October 22, 2026.
Last reviewed October 22, 2026.