Can I cancel FHA MIP by paying down to 78 percent LTV?

No. The Homeowners Protection Act 78 percent rule applies to conventional PMI only, not FHA MIP. FHA MIP cancellation follows HUD Mortgagee Letter 2013-04 which uses original down payment, not current LTV. Under 10 percent down at origination means MIP for the full loan term. 10 percent or more at origination means MIP cancels at year 11.

How do I drop FHA MIP if I have under 10 percent down?

Refinance to a conventional loan. Once you reach 80 percent LTV through amortisation plus appreciation, a conventional refinance eliminates MIP entirely. On a $300k home with 3 percent annual appreciation and 3.5 percent FHA down, this typically happens around year 4 to 5.

Do I get any UFMIP refund if I refinance early?

Yes if you refinance within the first 3 years. HUD provides a partial UFMIP refund on FHA-to-FHA refinances during the first 36 months, declining each month. After month 36 the refund is zero. There is no UFMIP refund for FHA-to-conventional refinances.

FHA MIP Cancellation Rules

FHA MIP cancellation rules come from HUD Mortgagee Letter 2013-04 (still in force April 2026). They are binary at 10% down at origination and do not respond to later LTV improvements. This is the single most misunderstood rule in FHA lending.

The rule, in one line

Under 10% down at origination: MIP for life of loan. 10% or more down at origination: MIP cancels after 11 years. Paying down to 80% LTV later does not cancel MIP.

MIP duration matrix

Original LTV at closing	Down payment	Annual MIP duration
95.01% or more (under 5% down)	3.5 to 4.99%	30 years (life of loan)
90.01 to 95%	5 to 9.99%	30 years (life of loan)
90% or less	10% or more	11 years

UFMIP at 1.75% is required regardless of down payment. UFMIP cannot be cancelled but partially refunds on FHA-to-FHA refinance within 36 months.

The only legitimate exit (under-10 down)

If you have under 10% down at origination, the only way to drop MIP is to refinance into a conventional loan. The break-even math:

Reach 80% LTV via combination of principal payments and appreciation
Closing costs on refi typically $4,000 to $6,000
Monthly MI savings of $130 to $180 on a $290k starting balance
Break-even on closing costs typically 24 to 36 months
Net 30-year saving from refinancing at year 5 vs holding FHA: roughly $30,000+ on a $300k home

UFMIP refund schedule

Month refinanced	UFMIP refund %
Month 1 to 3	80% to 75%
Month 6	70%
Month 12	60%
Month 18	50%
Month 24	40%
Month 30	30%
Month 36+	0%

Refund only applies on FHA-to-FHA refinance (FHA Streamline or standard FHA refi). FHA-to-conventional refinance forfeits any UFMIP refund.

Common misconceptions

"I will hit 80% LTV and ask FHA to drop MIP." No, HUD does not cancel MIP based on current LTV. Refinance is the only path.
"I will pay extra principal to cancel sooner." Extra principal does not affect MIP duration on FHA. Conventional yes, FHA no.
"My MIP will drop when I reach 22 percent equity." That is the conventional PMI rule (HPA), not FHA. The HPA does not apply to FHA loans.
"I will switch lenders to get MIP cancelled." MIP is a HUD requirement, not a lender choice. No lender can cancel MIP without refinancing the loan.

Rate disclaimer

Refinance rates and closing costs change. Consult a licensed loan officer when considering an FHA-to-conventional refi.

Sources

HUD Mortgagee Letter 2024-04 (current MIP rates): HUD ML 2024-04
HUD Mortgagee Letter 2013-04 (MIP duration rules): HUD mortgagee letters
HUD Handbook 4000.1 Section II.A.8 (MIP): HUD 4000.1
HPA 12 USC 4902 (conventional PMI only): 12 USC 4902