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title: “FHA MIP vs Conventional PMI: A Detailed Cost Comparison” ogImage: “/og/satori/fha-mip-vs-conventional-pmi-comparison.png” description: “Understand the key differences between FHA mortgage insurance premiums and conventional private mortgage insurance, including costs, duration, and cancellation rules.” pubDate: 2026-03-16 faqSchema:

  • question: “What is the difference between FHA MIP and conventional PMI?” answer: “FHA MIP is a government-required insurance with an upfront premium (1.75%) plus annual premiums. Conventional PMI is private insurance with no upfront fee, and it cancels automatically at 78% LTV.”
  • question: “Can you remove FHA mortgage insurance?” answer: “FHA MIP can only be removed by refinancing to a conventional loan, paying off the mortgage, or waiting 11 years (only if you put 10%+ down). With less than 10% down, MIP never cancels.”
  • question: “How much does FHA MIP cost per month?” answer: “FHA annual MIP typically costs 0.50-0.85% of the loan balance per year, paid monthly. On a $300,000 loan at 0.55%, that is about $137.50 per month.”
  • question: “When does conventional PMI fall off?” answer: “Conventional PMI automatically cancels when your loan balance reaches 78% of the original home value. You can request removal at 80% LTV, which typically takes 5-11 years.”
  • question: “Is FHA MIP more expensive than conventional PMI?” answer: “FHA MIP is usually more expensive overall because of the upfront premium and the fact that it lasts longer. However, for borrowers with credit scores below 680, FHA MIP may actually cost less per month than conventional PMI.”
  • question: “Can I avoid mortgage insurance entirely?” answer: “Yes, by putting 20% or more down on a conventional loan. FHA loans always require mortgage insurance regardless of down payment amount.”---

Quick Answer

FHA mortgage insurance premiums (MIP) and conventional private mortgage insurance (PMI) serve the same purpose but differ significantly in cost structure and duration. FHA loans charge a 1.75% upfront premium plus ongoing annual premiums that often last for the entire loan term, while conventional PMI has no upfront fee and automatically cancels when you reach 78% loan-to-value.

Key Takeaways

  • FHA loans require a 1.75% upfront MIP plus annual premiums of 0.50-0.85%
  • Conventional PMI has no upfront fee and costs 0.30-1.50% annually depending on credit score
  • Conventional PMI automatically cancels at 78% LTV; FHA MIP lasts the full loan term (with <10% down)
  • FHA MIP can only be removed by refinancing or paying off the loan
  • Borrowers with credit scores above 700 typically pay less total insurance with a conventional loan
  • For credit scores below 680, FHA MIP may be cheaper monthly despite the upfront cost

Understanding FHA MIP

FHA mortgage insurance comes in two parts:

Upfront MIP (UFMIP)

The upfront premium is a one-time charge of 1.75% of the base loan amount. For a $300,000 loan, this equals $5,250. Most borrowers finance this into the loan, increasing the total loan amount to $305,250.

Annual MIP

The annual premium is calculated based on your loan amount, down payment, and loan term. The rate ranges from 0.15% to 0.85% per year, divided into monthly payments.

FHA Annual MIP Rates (30-year loans):

  • Less than 5% down: 0.85% annually
  • 5% to 9.99% down: 0.80% annually
  • 10% or more down: 0.50% annually

Duration:

  • Down payment less than 10%: MIP lasts for the entire loan term (up to 30 years)
  • Down payment 10% or more: MIP lasts for 11 years

Understanding Conventional PMI

Conventional private mortgage insurance works differently. There is no upfront premium — you only pay a monthly premium based on your credit score and down payment.

PMI Rate Factors

Your PMI rate depends on three main factors:

  1. Credit score: Higher scores get lower rates
  2. Down payment: Larger down payments get lower rates
  3. Loan type: Adjustable rates may have higher PMI

Estimated Annual PMI Rates:

  • 760+ credit, 10% down: 0.25-0.40%
  • 720-759 credit, 10% down: 0.35-0.50%
  • 680-719 credit, 10% down: 0.50-0.70%
  • 620-679 credit, 10% down: 0.70-1.20%

PMI Cancellation Rules

One of the biggest advantages of conventional PMI is that it does not last forever:

  • At 80% LTV: You can request PMI cancellation in writing
  • At 78% LTV: PMI automatically cancels by law (for loans originated after 1998)
  • At any time: You can pay down your balance to reach these thresholds faster

Real-World Cost Comparison

Let us compare the mortgage insurance costs for a $350,000 home purchase:

Scenario: 5% down, 700 credit score, 30-year term

FHA Loan ($332,500 loan amount):

  • Upfront MIP: $5,819 (financed)
  • Annual MIP rate: 0.80%
  • Monthly MIP: $221.67
  • Total MIP over 30 years: $85,321 (including upfront)

Conventional Loan ($332,500 loan amount):

  • Upfront PMI: $0
  • Annual PMI rate: ~0.55%
  • Monthly PMI: $152.29
  • PMI cancels at ~year 9
  • Total PMI paid: ~$16,447

Savings with conventional: ~$68,874 over the loan life

This comparison shows why borrowers with good credit typically save significantly with conventional loans. Use our FHA vs Conventional Calculator to run your own numbers.

When FHA MIP Is Actually Cheaper

For borrowers with credit scores below 680, the math can flip. Conventional PMI rates increase sharply for lower credit scores, while FHA MIP rates are the same regardless of credit score.

Scenario: 5% down, 620 credit score

  • FHA monthly MIP: $221.67 (same rate for all credit scores)
  • Conventional monthly PMI: ~$360-420 (much higher for low credit)
  • In this case, FHA MIP is significantly cheaper monthly

This is why FHA loans are often recommended for borrowers with lower credit scores despite the upfront MIP cost.

How to Remove FHA MIP

If you already have an FHA loan and want to eliminate MIP, your options are:

  1. Refinance to conventional: Once you have 20% equity (through payments or appreciation), refinance into a conventional loan to drop MIP entirely.
  2. Make extra payments: Pay down the principal faster to reach 78% LTV, then refinance.
  3. Wait it out: If you put 10%+ down, MIP drops off after 11 years.

Learn more about this strategy in our FHA to conventional refinance guide and our complete guide to FHA loans.

Making Your Decision

The right choice depends on your credit score, down payment, and how long you plan to stay in the home. Use our comparison calculator to see exact numbers for your situation, and check out our first-time homebuyer guide for a comprehensive overview of all your options.

Try Our Calculator

Use our FHA vs Conventional Loan Comparison Calculator to see personalized numbers for your situation.