FHA Mortgage Insurance Refunds

Expenses and Initial Investment
Borrowers pay FHA a mortgage insurance premium in exchange for guaranteeing their loan. Under some circumstances, the borrower may be due a refund of some of this premium.

If you pay off your mortgage early, you may be due a refund for a portion of your unused mortgage insurance premiums. Also, anyone that acquired a loan after September 1, 1983, paid the upfront premium at closing, and did not default on payments may also be due a partial refund.

Refunds are based on the number of months the loan has been insured, and any refund amount is calculated at the termination of the loan. For loans that closed before January 1, 2001, you must claim a refund within seven years of terminating the loan; for loans closing after that date, you have five years to claim the refund.

If you pay off your loan, your mortgage company should send a form to HUD to request termination of the mortgage insurance, and then any refund due will be calculated and send directly to you. If you do not receive this, or receive a request for additional information, it is important to contact HUD to ensure that the mortgage lender did send HUD the required documentation.

Even if you’re not due a refund from your mortgage insurance, you may still be due money. Since FHA is a self-funded government entity, it does not make a profit, and excess earnings from the fund may be paid out to policy holders in the form of a distributive share.

If a property is assumed by another party, the insurance continues to remain in force, and any refund due at the end of the contract will be given to the owner of the property at the time the insurance is terminated. In the case of a refinancing, any refunds due from the old premium can be applied to the new mortgage’s upfront premium.