Updated October 2026 by Texas Made Mortgage, Frisco, TX.
Quick answer: On most FHA loans made since 2013 with less than 10% down, the annual mortgage insurance premium (currently 0.55% of the loan amount for typical loans) never goes away. On a $380,000 balance that is about $174 a month. Once your home has 20% equity, refinancing into a conventional loan with no PMI removes it; even at 10% to 15% equity, conventional PMI is often cheaper than FHA's MIP for borrowers with good credit. The decision hinges on three numbers: the MIP you save, the rate difference between your FHA loan and today's conventional rate, and the closing costs. Run the break-even before you move.
Why does FHA mortgage insurance last so long?
FHA loans closed after June 2013 with less than 10% down carry the annual MIP for the life of the loan. With 10% or more down it drops after 11 years. There is no request-to-cancel process like conventional PMI. The only exits are paying the loan off, selling, or refinancing into a non-FHA loan. FHA also charges an upfront premium of 1.75% at origination, which is partly refundable if you refinance into another FHA loan within three years, but not if you move to conventional.
What does the worked example look like?
Homeowner in McKinney bought in 2023 with 3.5% down, FHA balance now $380,000, home worth $490,000 (about 22% equity), FHA rate slightly below today's conventional rates, MIP 0.55%:
MIP today: $380,000 × 0.55% ÷ 12 = about $174 a month.
Conventional refinance at 78% loan-to-value: no PMI.
If the new conventional rate is 0.25% higher than the FHA rate, principal and interest rises by roughly $60 a month on this balance.
Net monthly savings: about $174 − $60 = $114.
Closing costs: assume $5,500 (title reissue credit helps on a refinance).
Break-even: $5,500 ÷ $114 ≈ 48 months, about four years.
If the homeowner plans to stay more than four years, the refinance wins and the savings run for the rest of the loan. If the conventional rate is lower than the FHA rate, the break-even collapses to a year or two. If the conventional rate is much higher, the MIP savings can be wiped out and staying put is right.
Can I refinance before I reach 20% equity?
Yes. Conventional loans at 85% to 90% loan-to-value carry PMI, but conventional PMI is priced by credit score and can be removed later at 20% equity, while FHA MIP is flat and permanent. A borrower with a 760 score at 88% LTV often pays less in conventional PMI than in FHA MIP, and the PMI falls off in a few years. A borrower with a 640 score usually does not benefit until 20% equity.
How do I know my equity?
Lenders use the appraised value on the refinance, not your purchase price. In the fast-appreciating parts of Collin and Denton County, buyers from 2021 to 2023 often have more equity than they think; buyers from late 2022 to 2024 may have less. An automated valuation gives a rough idea, and some conventional refinances receive an appraisal waiver, which removes the appraisal cost. See appraisal waivers.
What about the FHA Streamline instead?
The FHA Streamline lowers your rate with no appraisal and little paperwork, but it keeps FHA mortgage insurance. It is the right tool when rates have dropped and you do not yet have the equity for conventional, or when your credit would not qualify for a conventional loan. We run both and tell you which saves more. See FHA Streamline.
When is staying in FHA the smarter move?
Your FHA rate is far below today's conventional rates and the MIP is smaller than the rate difference.
You plan to sell within two to three years.
Your credit score has dropped since purchase, making conventional pricing expensive.
You want to keep the FHA loan assumable for a future buyer in a high-rate market.
Frequently asked questions
Does the upfront FHA premium get refunded if I go conventional?
No. The partial refund applies only to an FHA-to-FHA refinance within three years.
Can I roll closing costs into the conventional refinance?
Usually yes on a rate-and-term refinance, as long as the loan stays within the allowed loan-to-value.
Does Texas treat this as a cash-out?
No. Paying off the FHA loan with a new loan for the same balance plus costs is a rate-and-term refinance, so the Texas 50(a)(6) rules do not apply.
Want the break-even on your actual FHA loan? Send us your statement and a loan officer at Texas Made Mortgage will show FHA Streamline versus conventional side by side. Call 817-567-8014.
Texas Made Mortgage, NMLS #2676326. This article is general education, not a commitment to lend or an offer of credit. Rate differences and costs are illustrative; your figures will be disclosed on a Loan Estimate. Whether refinancing makes sense depends on your rate, balance, costs and timeline. All loans subject to credit approval. Equal Housing Opportunity.
