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What Is FHA Mortgage Insurance (MIP)?

Written by Alycia Lucio on August 1, 2023

Mortgage insurance premium (MIP) is a fee the Federal Housing Administration requires on all FHA loans to protect the mortgage lender if the borrower defaults on the loan.

While you'll pay an MIP fee when you close on the loan and another fee monthly, FHA loans do come with lower credit score minimums, lower down payment requirements and more flexible income requirements compared to other home loans like conventional mortgages. This often makes FHA loans more attainable for some borrowers.

Paying for mortgage insurance on a home loan is common, and FHA loans are not the only type of mortgage to require some form of insurance protection. In this guide, we'll share how these insurance types compare and how much you can expect to pay for MIP, as well as for how long.

Check out today's FHA mortgage rates with Zillow Home Loans.

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What is mortgage insurance premium (MIP)?

MIP stands for mortgage insurance premium. You'll pay two forms of MIP — one upfront at closing and another monthly over the loan term.

If you don't have the money upfront, the FHA does allow you to roll upfront premium costs into your mortgage and pay them as part of your monthly payment. Rolling the cost into your mortgage would increase your monthly costs, but make your upfront closing costs lower. Alternatively, you can choose to pay both portions (upfront and annual MIP) at closing to lower monthly costs.

Upfront MIP

Upfront mortgage insurance premium, often abbreviated as UFMIP, is a one-time payment equal to 1.75% of the loan amount. Upfront MIP is due at closing with other closing costs, which is why it's called "upfront". The upfront fee is what is used to protect the lender in case the borrower defaults.

Annual MIP

Annual MIP helps cover the cost of the FHA’s insurance program. For most loans, this is an annual payment of 0.55% of the loan amount, divided into 12 monthly payments. You'll pay annual MIP alongside your principal and interest payments each month for the duration of your loan.

MIP vs PMI

Both private mortgage insurance (PMI) and mortgage insurance premiums (MIP) are types of insurance that protect the lender when a borrower defaults on their mortgage. The main difference is that PMI applies to conventional loans, while MIP applies to FHA loans.

Lenders offering conventional loans require PMI when a borrower makes a down payment of less than 20% of the purchase price on a home. PMI is usually paid in monthly installments and can be canceled once the borrower has acquired 20% equity. It can also be removed by refinancing, assuming the borrower has paid down the mortgage principal enough to increase their home equity or they reach an 80% loan-to-value ratio.

For FHA loans, MIP is paid as a combination of a single upfront premium at closing and ongoing monthly payments. For most FHA borrowers, MIP will endure for the life of the loan, unless the borrower chooses to refinance into a non-FHA loan. The only exception is for borrowers who put at least 10% down, in which case MIP may be removed after 11 years.

This table summarizes the key differences between PMI and MIP.

	PMI	MIP
Type of loan	Conventional	FHA
Requirements	PMI is required when your down payment is less than 20%.	MIP is required on all FHA loans, regardless of the down payment amount.
Paid	Monthly	Upfront and monthly
Cost	PMI is typically between 0.0022% to 0.025% of the loan amount.	Upfront MIP is 1.75% of the loan amount. Monthly MIP varies by loan duration and LTV but is typically 0.55%.
Cancellation	PMI can be removed when you have paid down the loan principal enough to reach 20% equity.	MIP typically can’t be removed. Some borrowers may remove it after 11 years or by refinancing to a conventional loan.

How much does FHA mortgage insurance cost?

Most FHA borrowers will pay an upfront payment of 1.75% of the loan amount at closing. Then, they’ll pay 0.55% of the loan amount each year, divided into 12 monthly payments. For example, if you borrow $300,000, you’ll pay an upfront payment of $5,250. Then, each year you’ll pay $1,650, divided into 12 payments of $137.50 per month.

Annual rates vary depending on the loan amount and the borrower’s loan-to-value ratio (LTV), which is the loan amount compared to the value of the property.

Here are the annual MIP rates as of 2023 for 30-year and 15-year FHA loans.

30-year loan MIP costs

Principal loan amount	Loan-to-value ratio (LTV)	Annual MIP
$726,200 or less	At least 90%, no more than 95%	0.50% of loan amount
$726,200 or less	More than 95%	0.55% of loan amount
More than $726,200	At least 90%, no more than 95%	0.70% of loan amount
More than $726,200	More than 95%	0.75% of loan amount

15-year loan MIP costs

Principal loan amount	Loan-to-value ratio (LTV)	Annual MIP
$726,200 or less	90% or less	0.15% of the loan amount
$726,200 or less	Less than 90%	0.40% of the loan amount
More than $726,200	78% or less	0.15% of the loan amount
More than $726,200	At least 78%, no more than 90%	0.40% of the loan amount
More than $726,200	More than 90%	0.65% of the loan amount

How long do I have to pay MIP?

All FHA loan borrowers will pay MIP for the life of the loan. The exception is if your loan originated prior to June 3, 2013 and you now hold 22% equity in the home, then you can then request to cancel the MIP to stop payments. For all loans originated after June 3, 2013, you can only request removal of MIP after 11 years if you make a down payment of 10% or more. Once your removal request is approved, you no longer have to make MIP payments.

How can I get rid of mortgage insurance on an FHA loan?

If you make a down payment of 10% or more, you can get rid of mortgage insurance on an FHA loan after 11 years. Otherwise, you cannot remove MIP. While you used to be able to request a cancellation of MIP after you reached a loan-to-value ratio of 78%, laws have since changed for any FHA loan originated after June 3, 2013. Another way to get out of paying MIP is to refinance your mortgage into a non-FHA loan (like a conventional mortgage) or sell the home, removing your obligation to pay MIP.