Many FHA homeowners assume they must wait until they reach 20% equity before refinancing.
That’s not always true.
The real question isn’t just “Can you refinance?”
It’s:
Can you refinance in a way that actually improves your long-term position?
Let’s break down what’s possible — and when it makes sense.
You may be able to refinance even if you have:
- 15% equity
- 10% equity
- Or sometimes even less
However, the outcome depends on the type of refinance.
There are three primary paths:
- FHA Streamline Refinance
- FHA-to-FHA Rate & Term Refinance
- FHA-to-Conventional Refinance
Each works differently.
Option 1: FHA Streamline Refinance (Low Equity Friendly)
FHA Streamline is often the easiest option if:
- You have limited equity
- You want reduced documentation
- You’re primarily adjusting rate or payment
Key points:
- Often no appraisal required
- Limited income documentation
- Does not remove FHA mortgage insurance
If your goal is eliminating MIP, this option will not solve that problem.
For a deeper breakdown, see our guide on FHA Streamline refinance pros and cons.
Option 2: FHA-to-FHA Refinance
You can refinance into another FHA loan even with limited equity.
However:
- Mortgage insurance remains
- Appraisal is usually required
- Qualification review applies
This path may help adjust rate or term — but does not eliminate FHA MIP.
If you’re unsure how FHA insurance works, review our full guide on FHA mortgage insurance explained.
→ Lead more: FHA Mortgage Insurance Explained
Option 3: FHA to Conventional With Less Than 20% Equity
This is where it gets more nuanced.
Yes, you may refinance from FHA to conventional with less than 20% equity.
But:
- You will likely need to carry private mortgage insurance (PMI)
- PMI cost depends on credit score and loan structure
- PMI may be removable later once equity improves
In some real-world refinance scenarios reviewed by our lending team, homeowners refinanced at 15–18% equity, accepted temporary PMI, and later removed it when home values increased.
The math matters.
The 20% Equity Threshold — Why It’s Important
Reaching 20% equity (80% loan-to-value ratio) often allows:
- Removal of mortgage insurance
- Stronger conventional pricing
- Greater long-term savings
If you’re close to that threshold, timing becomes strategic.
See our full breakdown of how much equity you need to remove FHA MIP.
Sometimes waiting 6–12 months improves the overall outcome.
When Refinancing With Less Than 20% Equity Makes Sense
It may make sense if:
- Your interest rate is significantly higher than current options
- Your credit score has improved substantially
- PMI cost would be lower than FHA MIP
- You plan to stay in the home long enough to recover closing costs
If you're unsure how to evaluate timing, review our guide on how to calculate your refinance break-even point.
When You May Want to Wait
Refinancing with low equity may not make sense if:
- Closing costs outweigh potential savings
- You’re very close to 20% equity
- Your credit score is still improving
- Market conditions may shift favorably
Strategic patience can sometimes be the smarter financial move.
FHA vs Conventional Refinance With Low Equity
Factor | FHA Refinance | Conventional Refinance (<20% equity) |
| Mortgage Insurance | Required | PMI required |
| Insurance Removal | Often lifetime | May be removable later |
| Credit Sensitivity | Lower | Higher |
| Long-Term Flexibility | Limited | Greater |
The key difference is future flexibility.
If you’re comparing both paths, see our full guide on FHA vs conventional refinance.
The Bigger Question: What Is Your Goal?
Ask yourself:
- Are you trying to lower payment?
- Remove mortgage insurance?
- Access equity?
- Improve loan flexibility?
Your objective determines whether refinancing with less than 20% equity is smart — or premature.
Why Homeowners Evaluate Low-Equity FHA Refinance with Loan Factory
Refinancing below 20% equity requires structured comparison — not assumptions.
Why Homeowners Choose Loan Factory:
- Best Price Guarantee – If Loan Factory can’t beat a competitor’s official offer, you get $1,000 (Terms & Conditions apply)
- Zero application or junk fees
- Transparent side-by-side comparison of 240+ wholesale lenders
- Local loan advisors focused on total loan cost — not just rate
- AI-powered MOSO platform for real-time scenario analysis
- Trusted guidance led by Thuan Nguyen, #1 Loan Officer in the U.S.
We help you see whether refinancing now improves your position — or whether waiting creates stronger leverage.
Want to See If You Qualify With Less Than 20% Equity?
Apply online: https://www.LoanFactory.com/apply
Compare refinance options: https://www.LoanFactory.com/quote
Set up a rate alert: www.loanfactory.com/mortgage-rate-alert
For faster support, call or text (660) 333-3333.
Based on real-world jumbo loan scenarios reviewed by Loan Factory’s lending team across multiple high-cost markets.
This content is for informational purposes only and not a commitment to lend. Loan options, rates, and terms depend on credit, income, property value, underwriting, and investor guidelines.
FAQ: Refinance FHA With Less Than 20% Equity
