Mortgage insurance premiums (MIP) are used to protect lenders against loss in the event of a foreclosure. For most of its mortgage insurance programs, FHA collects an upfront mortgage insurance premium (UFMIP), and annual insurance premium, which is collected in monthly installments.

The UFMIP for FHA traditional purchase and refinance products will be charged for all amortization terms.

The amount of the annual premium is based on the loan-to-value (LTV) ratio and the term of the mortgage. The monthly premium varies by program, and based on the outstanding principal balance.

FHA’s annual MIP is automatically cancelled when a loan reaches a specified LTV. The MIP cancellation provision only applies to loans with a UFMIP.

Effective for mortgages endorsed for insurance on or after December 8, 2004 UFMIP refunds has been eliminated except when a borrower refinances to another mortgage to be insured by FHA within a 3 year time period.