When should I refinance my FHA loan to conventional?

Refinance from FHA to conventional when you have at least 20% equity in your home, a credit score of 680 or higher, and the savings from eliminating MIP exceed your refinancing costs within 2-3 years.

How much does it cost to refinance FHA to conventional?

Closing costs for refinancing FHA to conventional typically range from 2% to 5% of the loan amount. For a $300,000 loan, that is $6,000 to $15,000. These costs can sometimes be rolled into the new loan.

Can I refinance FHA to conventional without 20% equity?

Yes, you can refinance to conventional with less than 20% equity, but you will still need PMI. However, conventional PMI is often cheaper than FHA MIP and cancels at 78% LTV, so it may still save you money.

How do I calculate the break-even point for refinancing?

Divide your total closing costs by your monthly savings. For example, if closing costs are $5,000 and you save $200/month, your break-even point is 25 months. Refinancing makes sense if you plan to stay beyond that point.

Will my credit score affect my conventional refinance rate?

Yes, conventional loan rates are heavily credit-score dependent. A score of 740+ gets the best rates, while scores below 700 may face higher rates and PMI premiums. Check your score before deciding to refinance.

When to Refinance FHA to Conventional: Break-Even Analysis

Quick Answer

Refinancing from FHA to conventional typically makes sense once you have 20% equity and a credit score of 680+. The savings from eliminating FHA MIP (which lasts for the life of the loan) usually offset refinancing costs within 2-3 years, resulting in tens of thousands of dollars in savings over the remaining loan term.

Key Takeaways

Refinance FHA to conventional once you reach 20% equity
Break-even is typically 18-36 months after refinancing
Even with less than 20% equity, conventional PMI may be cheaper than FHA MIP
Credit score of 680+ needed for competitive conventional rates
Total savings over remaining loan term can exceed $40,000

Break-Even Calculation Example

Current FHA Loan:

Balance: $280,000
Rate: 6.25%
Monthly MIP: $128/month (0.55% annual)
Total Monthly Payment: $1,854

New Conventional Loan:

Balance: $280,000
Rate: 6.25% (same rate)
Monthly PMI: $0 (20% equity)
Total Monthly Payment: $1,723

Monthly Savings: $131 Closing Costs: $5,600 (2% of loan) Break-Even: 43 months (3.5 years)

10-Year Savings: $10,120 net of closing costs 20-Year Savings: $25,640 net of closing costs

Use our FHA vs Conventional Calculator to run your specific numbers.

When Refinancing Makes Sense

You should strongly consider refinancing when:

Your home has appreciated enough for 80% LTV or better
Your credit score has improved to 680+
Current conventional rates are equal to or lower than your FHA rate
You plan to stay in the home for at least 3+ more years

When to Wait

Consider delaying if:

Your credit score is below 680 (conventional rates may be too high)
You plan to move within 2 years
Closing costs would take too long to recoup
Your FHA rate is already very low and conventional rates are higher

Step-by-Step Refinance Process

Check your equity — get an estimate of your home’s current value
Check your credit score — aim for 680+ for best conventional terms
Calculate break-even — compare closing costs vs monthly savings
Shop lenders — get quotes from at least 3 conventional lenders
Apply and close — typical timeline is 30-45 days

For the full refinancing picture, compare with the FHA Streamline option and review our total cost comparison.