The upfront mortgage insurance premium required by the FHA is 1.75% of the loan amount. The annual premium is divided into 12 equal payments that are deducted from your monthly mortgage payment. The total annual premium amount varies depending on the size of the loan, the down payment, and the loan to value ratio. There are some exceptions, but in general, the higher the down payment, the lower the annual premium amount. However, it is not possible to cancel the mortgage insurance premium after it is applied.
FHA Mortgage Insurance
The upfront mortgage insurance premium is paid as part of the loan’s closing costs. This payment can be financed or rolled into the loan and is paid only once. Thereafter, the mortgage insurance premium can be adjusted based on the amount of the loan, down payment, and the length of the mortgage. The cost of mortgage insurance is generally determined by the upfront premium, down payment, and the expected outstanding balance during the loan term.
FHA mortgage insurance is a legal requirement for borrowers who put less than 10 percent down. But, borrowers can cancel their insurance after eleven years or when they reach 20 percent home equity. When they refinance, the equity in the home takes the place of the down payment Mortgage Adviser Swindon. Those who finalized their FHA mortgage before May 31 are subject to special rules. The upfront premium is 0.01 percent of the loan amount, while the annual premium is 0.55 percent.