MIP (Mortgage Insurance Premium)
The FHA's mortgage insurance — an upfront premium of 1.75% plus an annual premium — that, unlike conventional PMI, usually lasts the life of the loan.
What does MIP mean?
MIP is the FHA's version of mortgage insurance, in two parts: an upfront premium of 1.75% of the loan (usually financed in) and an annual premium added to every payment. The crucial difference from conventional PMI is duration — on most FHA loans MIP runs for the life of the loan unless you put down 10% or more, which is why many borrowers refinance into a conventional loan to shed it.
An FHA mortgage-insurance example
On a $400,000 home with 3.5% down, the base loan is $386,000:
| Premium | Rate | Cost |
|---|---|---|
| Upfront MIP (usually financed) | 1.75% | $6,755 — loan becomes $392,755 |
| Annual MIP (paid monthly) | 0.55% | about $177 a month |
Annual MIP ranges from 0.15% to 0.55% depending on the loan term, loan amount and down payment; 0.55% is the rate on most 30-year FHA loans.
How long you pay it
Put down less than 10% and annual MIP lasts for the life of the loan. Put down 10% or more and it ends after 11 years. Unlike conventional PMI, it does not drop off automatically when you reach 20% equity.
The usual way out is to refinance into a conventional loan once you have about 20% equity and the credit to qualify — compare the closing costs against the MIP you would save.
Frequently asked
How long do you pay FHA MIP?
On most FHA loans the annual premium lasts the life of the loan if you put down less than 10%; with 10% or more down it drops off after 11 years. Many borrowers refinance into a conventional loan to remove it.
What is the difference between MIP and PMI?
MIP is the FHA’s mortgage insurance and usually lasts the life of the loan; PMI is on conventional loans and cancels around 20% equity. That cancellability is a key reason a conventional loan can be cheaper over time.
Put it to use
FHA Loan Calculator
Estimate an FHA payment including upfront and annual mortgage insurance premiums (MIP).
Mortgage Calculator with PMI
Include private mortgage insurance in your payment and find out exactly when PMI drops off.
Down Payment Calculator
Turn a down-payment percentage into dollars and see whether you clear the 20% PMI threshold.
Related terms
All glossary terms