YOU ASK:

If I pay upfront mortgage insurance for an FHA loan, do I get a refund later on?

WE ANSWER:

The good news is: yes, you can!

There are some instances where you may be eligible for refunds for part of the insurance premiums you already paid. Some instances that you need to meet include:

  • No defaults on the mortgage payments
  • Up front mortgage insurance premiums paid at closing
  • The loan was acquired after September 1, 1983

There are also refunds (called a Distributive Share Payment) for the excess earnings from the Mutual Mortgage Insurance Fund. Your loan, if it falls under the following conditions, may be eligible for a refund as well:

  • Terminated FHA insurance prior to November 5, 1990
  • Faithfully paid your monthly mortgage amortizations for over seven years
  • The loan was acquired or originated prior to September 1, 1983

It is the FHA Commissioner who determines how much refunds you stand to get at the time your loan is terminated. The amount is determined by the number of months that you have been paying premiums and the loan is insured.

The following are some instances where the premiums are not refunded:

  • For FHA-insured loans closed before January 1, 2001 and endorsed before December 8, 2004, there will be no refunds after seven years has passed.
  • For FHA-insured loans closed on January 1, 2001 and onwards and endorsed prior to December 8, 2004, there will be no refunds after the fifth year.
  • For all other FHA-insured loans that are endorsed from December 8, 2004 onwards, there are no refunds. The exception would be when the loan is refinanced. Further, there will be no refund after the insurance coverage's third year.

The process for getting refunds would be:

  • Once your FHA mortgage insurance is terminated, the mortgage company will notify HUD of such.
  • If you are qualified to get a refund, someone from HUD will send you an Application for Premium Refund or for Distributive Share Payment. Or, the Department of Treasury will send you a check.
  • Once you receive the form, fill it up carefully, sign it and have the document notarized.
  • Send the application form (along with documents that show you are the rightful owner of the property during the termination of the insurance) to the HUD.
  • Wait for the check to be sent to you.
  • If there are some issues that need to be threshed out, the HUD may ask you for additional documents.
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