Maybe a loan officer can chime in here but wouldn’t the amount of the new monthly MIP negate any potential savings in interest rate?

I’d rather keep paying the principal down (as you are) than throwing more (non-tax deductible for principal residence) MIP to the wind.

I’m afraid the up-front costs of a new FHA loan ALSO will cause your LTV to increase. Doesn’t FHA only allow about 103% LTV with MIP rolled in?

I think you may be stuck, TK. You have the option of waiting out the rest of this RE downturn with your current mtg and continue to maintain your property. Perhaps in the coming years you will qualify to retire your MIP.

see: http://www.approvedfha.com/fha-mortgage-insurance.html

to calculate what your new up-front and monthly MIP would be if you refinanced FHA

edit: the above post assumes you have purchased a residence with an FHA mtg in the last 8 years.