Short answer: an FHA loan carries two mortgage insurance premiums: an upfront premium, which HUD’s current table sets at 1.75 percent of the base loan amount and which you can pay at closing or add to the loan, and an annual premium paid monthly with your mortgage payment. For a loan with an original loan-to-value ratio (LTV) above 90 percent, the annual premium lasts for the mortgage term; at 90 percent or less, it lasts 11 years. The cancellation rules for private mortgage insurance do not apply to FHA insurance. This page covers federal law only. It is general information, not legal or financial advice.
What FHA mortgage insurance is
The CFPB says mortgage insurance protects the lender, not you, if you fall behind; that FHA mortgage insurance is required for all FHA loans and costs the same no matter your credit score, with a slight increase for down payments under five percent; and that if you add the upfront fee to the loan, your loan amount and overall cost go up (CFPB, last reviewed August 28, 2026, read October 30, 2026; this page may be out of date).
Current premium rates
HUD sets the rates within the legal caps below. Its current table (HUD Handbook 4000.1, Appendix 1.0, dated March 20, 2023, in the Handbook update issued August 12, 2026, HUD, read October 30, 2026) shows an upfront premium of 1.75 percent of the base loan amount for all mortgages, apart from a few listed exceptions, and these annual premiums for a mortgage term of more than 15 years:
| Base loan amount | Original LTV | Annual premium | How long |
|---|---|---|---|
| $726,200 or less | 90% or less | 0.50% | 11 years |
| $726,200 or less | Over 90% to 95% | 0.50% | Mortgage term |
| $726,200 or less | Over 95% | 0.55% | Mortgage term |
| Over $726,200 | 90% or less | 0.70% | 11 years |
| Over $726,200 | Over 90% to 95% | 0.70% | Mortgage term |
| Over $726,200 | Over 95% | 0.75% | Mortgage term |
For terms of 15 years or less, the table lists lower annual premiums (0.15 to 0.65 percent, depending on the loan amount and LTV). HUD may revise this table, so ask the lender which table applies to your case number. The Handbook says the upfront premium is not refundable except in a refinance to a new FHA-insured loan, and that the annual premium is payable monthly.
Legal caps
The National Housing Act caps the upfront premium at 3 percent of the original insured principal (2.75 percent for a first-time homebuyer who completes homeownership counseling that HUD has vetted), and the annual premium at 1.5 percent of the remaining insured balance, or 1.55 percent when the original principal is above 95 percent of the appraised value (12 U.S.C. 1709(c)(2)(A)-(B), LII, read October 30, 2026). The same subsection sets the periods: the first 11 years when the original principal is under 90 percent of the appraised value, and the first 30 years at 90 percent or more. HUD’s regulation still lists older, lower caps of 2.25 percent upfront and 0.50 or 0.55 percent annually (24 CFR 203.284(a), eCFR, text up to date as of October 28, 2026); 15-year loans are covered in 24 CFR 203.285 (eCFR). The regulation says the annual premium is figured on the average outstanding balance for each year of amortization, not counting the financed upfront premium (203.284(g)).
Example: two down payments
This example is only for the math, with an example price on a 30-year FHA loan, not terms from any lender. The annual premium shown is a rough first-year figure using the starting base loan amount; because it is figured on the average balance for the year, the actual amount is a little lower.
| Item | 3.5% down | 10.0% down |
|---|---|---|
| Price and down payment | $350,000, $12,250 | $350,000, $35,000 |
| Base loan amount (LTV) | $337,750 (96.5%) | $315,000 (90%) |
| Upfront premium at 1.75% | $5,910.63 | $5,512.50 |
| Loan amount if the upfront premium is added (rounded down) | $343,660 | Not shown |
| Annual premium rate (from the table) | 0.55% | 0.50% |
| Rough first-year annual premium | $337,750 × 0.55% = $1,857.63 | $315,000 × 0.50% = $1,575.00 |
| Rough monthly amount | $155 | $131 |
| How long the annual premium lasts | Mortgage term (LTV over 90%) | 11 years (LTV 90% or less) |
How it differs from private mortgage insurance
The federal cancellation rules for private mortgage insurance, including the right to ask for cancellation at 80 percent and automatic termination at 78 percent, cover only insurance other than insurance under the National Housing Act, so they do not apply to FHA loans (12 U.S.C. 4901(13), LII). For FHA loans with case numbers assigned on or after June 3, 2013, HUD cancels the annual premium as its table says, after 11 years or at the end of the term. For loans closed on or after January 1, 2001 with case numbers assigned before June 3, 2013, older cancellation rules based on a 78 percent LTV apply (HUD Handbook 4000.1, servicing, MIP cancellation). Ask your servicer which applies. See how to remove private mortgage insurance and, for another way buyers avoid mortgage insurance, piggyback second mortgages.
Upfront premium refunds
The statute says that when a mortgage is paid in full before maturity, HUD refunds unearned upfront premium only if the borrower refinances under the FHA program (12 U.S.C. 1709(c)(2)(A)). The Handbook says that if you refinance an FHA loan into a new FHA loan within 3 years, a refund credit reduces the upfront premium on the new loan, starting at 80 percent of the premium paid in the first month and falling 2 points a month to 10 percent in the last month of year 3 (HUD Handbook 4000.1, refinances, upfront premium refunds). This example is only for the math: refinancing in month 6 of year 2 gives a 46% credit, or 46% × $5,910.63 = $2,718.89 on the upfront premium from the example above.
Older FHA loans could earn refunds under earlier rules (24 CFR 203.283, eCFR). HUD has a lookup at Does HUD Owe You A Refund?; see find unclaimed money before borrowing. Only use HUD’s own site; you do not need to pay anyone to get an FHA refund.
Questions to ask the lender
- What is my base loan amount, LTV and annual premium rate, and from which HUD table?
- Will the upfront premium be paid in cash or added to the loan, and what is the loan amount each way?
- How long will the annual premium last on this loan?
- If I refinance an FHA loan, what upfront premium refund credit applies?
- How would the total cost compare with a conventional loan with private mortgage insurance?
Checklist
- Find the upfront and monthly premium on your Loan Estimate and Closing Disclosure.
- Note your original LTV; it sets how long the annual premium lasts.
- Keep your FHA case number and closing papers.
- Before refinancing an FHA loan within 3 years, ask about the refund credit.
- Check HUD’s refund lookup if you paid off an older FHA loan.
You can submit a complaint at consumerfinance.gov/complaint.
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Sources
- CFPB: What is mortgage insurance and how does it work? (last reviewed August 28, 2026)
- HUD Handbook 4000.1, FHA Single Family Housing Policy Handbook (Update 18, issued August 12, 2026), PDF
- LII: 12 U.S.C. 1709, Insurance of mortgages
- eCFR: 24 CFR 203.284, Calculation of up-front and annual MIP on or after July 1, 1991, current text up to date as of October 28, 2026
- eCFR: 24 CFR 203.285, Fifteen-year mortgages: up-front and annual MIP, current text up to date as of October 28, 2026
- eCFR: 24 CFR 203.283, Refund of one-time MIP, current text up to date as of October 28, 2026
- Cornell LII: 12 U.S. Code 4901, Definitions (Homeowners Protection Act of 1998)
- HUD: Does HUD Owe You A Refund? (FHA mortgage insurance refunds)
- CFPB: Submit a complaint
Disclosure: Modern Lending Solutions is not a lender, loan broker or agent for any lender or loan broker, and does not make credit decisions. Any compensation we receive is paid by participating lenders, only for advertising services. This guide is general information, not financial or legal advice.