Cancelling the FHA monthly mortgage insurance premium payment is commonly misunderstood to automatically happen five years after the closing. In fact, the actual regulation cancels the monthly premium payment at the point the loan-to-value ratio reaches 78% through normal regular monthly payments. The five-year rule is that in any event the mortgage insurance monthly payment remains in place for the first 60 payments.  The five-year rule applies to those people who choose to prepay their mortgage or to those whose original loan to value ratio was close to or below the required 78%.  The monthly mortgage insurance premium payment is in place for 60 payments no matter what.

The 78% is measured against the lower of the original sale price or appraised value rather than on an appraisal secured at some point in the future thinking that market values have increased.