PMI and MIP are both types of mortgage insurance, but they apply to different types of loans and have different costs and cancellation rules.
PMI is private mortgage insurance associated with conventional financing, while MIP is the mortgage insurance charged on FHA loans. The difference can affect how much you pay upfront, your monthly mortgage payment and how long you have to keep paying for mortgage insurance.
PMI vs. MIP Basics
| Feature |
PMI |
FHA MIP |
| Full name |
Private mortgage insurance |
Mortgage insurance premium |
| Loan type |
Conventional loans |
FHA loans |
| Who provides the insurance? |
Private mortgage insurance company |
The FHA |
| Does credit affect the cost? |
Yes, along with factors such as LTV and loan structure |
FHA annual MIP rates are set by program rules rather than individually priced by credit score |
| Upfront charge? |
Depends on the PMI structure |
Most FHA loans have an upfront MIP, currently 1.75% of the base loan amount |
| Ongoing premium? |
Commonly paid monthly |
Annual MIP is generally divided into monthly payments |
| Can it end without refinancing? |
Yes, when applicable cancellation requirements are met |
Yes after 11 years when original LTV is 90% or less. Above 90% original LTV, annual MIP generally lasts for the loan term |
The CFPB explains that mortgage insurance protects the lender rather than the homeowner. The insurance reduces the lender's risk when a mortgage has characteristics such as a small down payment.
What Is PMI?
Private mortgage insurance is associated with conventional mortgages. A lender generally requires PMI when your down payment is less than 20%, although the exact requirement depends on the loan structure.
PMI is provided by a private mortgage insurance company rather than a government agency. Its price can vary based on factors such as your credit profile, loan-to-value ratio, mortgage amount and coverage requirements.
Most borrowers encounter borrower-paid PMI added to their monthly mortgage payment. Other structures can include a single premium or lender-paid mortgage insurance, where the lender pays for the coverage and generally accounts for that cost elsewhere in the loan's pricing.
You can use our PMI calculator to see how mortgage insurance can affect a conventional mortgage payment.
What Is FHA MIP?
Mortgage insurance premium is the term used for mortgage insurance on FHA loans. The FHA insures mortgages issued by approved private lenders, and mortgage insurance is part of the FHA program.
For most FHA forward mortgages, MIP has two components:
- Upfront mortgage insurance premium: Most FHA mortgages carry an upfront MIP equal to 1.75% of the base loan amount. You can generally finance this amount into the mortgage instead of paying it entirely in cash at closing.
- Annual mortgage insurance premium: FHA also charges annual MIP, which is generally collected through monthly mortgage payments.
FHA policy sets the upfront MIP for most forward mortgages at 1.75% of the base loan amount. Annual MIP rates vary based on factors including the mortgage term, original LTV and loan amount.
For example, a typical FHA purchase loan with a term longer than 15 years, an original LTV above 95% and a base loan amount at or below the applicable national conforming loan limit carries an annual MIP rate of 0.55% under the current FHA framework.
How PMI and MIP Costs Differ
There isn't one universal PMI rate that can be directly compared with one FHA MIP rate.
PMI is privately priced. The CFPB notes that PMI rates vary based on factors such as your down payment and credit score. A borrower with stronger credit and more money down can therefore receive substantially different PMI pricing from another borrower using the same conventional loan amount.
FHA takes a more standardized approach. Its MIP schedule depends on the loan's characteristics rather than using your individual credit score to set the mortgage insurance rate.
The upfront FHA premium creates another difference. Consider an FHA mortgage with a $300,000 base loan amount. At a 1.75% upfront MIP rate, the upfront premium would be $5,250.
If you finance that premium, it increases the mortgage balance rather than requiring an additional $5,250 in cash at closing. Financing it also means paying interest on the larger balance.
When Can You Remove PMI?
PMI on many conventional mortgages can eventually be removed without refinancing.
Under the federal Homeowners Protection Act rules described by The CFPB, you generally have the right to request PMI cancellation when your principal balance is scheduled to reach 80% of the home's original value.
You can also reach that 80% level earlier through additional principal payments. For cancellation under these rules, you generally need to make the request in writing, be current on the mortgage, have a qualifying payment history and satisfy other applicable requirements.
PMI generally must terminate automatically when the mortgage is scheduled to reach 78% of the home's original value, provided you're current on the loan. A separate final-termination rule generally ends PMI after the midpoint of the original amortization schedule if it hasn't already ended.
Fannie Mae and Freddie Mac loans can also have additional cancellation options under their servicing guidelines. For a deeper look at the process, see how to remove PMI from a conventional loan.
When Can You Remove FHA MIP?
FHA mortgage insurance follows a different timeline. Reaching 80% LTV does not give you the same cancellation right that applies to qualifying conventional PMI.
For FHA case numbers assigned on or after June 3, 2013, HUD bases the duration of annual MIP on your original loan-to-value ratio:
| Original FHA LTV |
Annual MIP Duration |
| 90% or less |
11 years or the end of the loan term, whichever comes first |
| More than 90% |
Loan term or 30 years, whichever comes first |
This means a buyer making the minimum 3.5% FHA down payment starts with a 96.5% LTV and generally pays annual MIP for the life of a typical 30-year FHA mortgage.
A buyer who begins with at least 10% down has an original LTV of 90% or less, so annual MIP generally ends after 11 years.
HUD also states that borrowers under these rules cannot request early annual MIP cancellation simply by paying down principal faster.
Do You Have to Refinance to Get Rid of MIP?
If your FHA loan started above 90% LTV and annual MIP is scheduled to last for the loan term, refinancing is one way to eliminate FHA MIP before the mortgage is paid off.
For example, you could refinance from an FHA loan into a conventional mortgage if you qualify. If the new conventional loan has a sufficiently low LTV, PMI may not be required. If PMI is required on the new loan, you would then follow the conventional PMI rules rather than FHA's MIP rules.
A refinance creates a new mortgage, however, which means a new rate, loan terms and closing costs. Removing mortgage insurance by itself doesn't guarantee that refinancing saves money. Compare the cost of keeping your existing mortgage with the complete cost of the proposed new loan.
The mortgage insurance refinance options can help frame that comparison.
Does a 20% Down Payment Avoid PMI and MIP?
With a conventional mortgage, a 20% down payment generally means you won't need PMI at closing because your starting LTV is 80%.
FHA works differently. FHA mortgage insurance is generally required even if you put 20% down. A larger FHA down payment can shorten how long you pay annual MIP, but it doesn't eliminate the upfront MIP requirement for a standard FHA mortgage.
That's one reason borrowers with strong credit and larger down payments often compare FHA and conventional financing carefully. The CFPB notes that FHA loans can cost more than conventional loans for borrowers with good credit and a medium-sized down payment, while FHA can be competitive for borrowers with smaller down payments or lower credit scores.
PMI vs. MIP: Which Is Better?
Neither mortgage insurance type is inherently better in every situation because you don't choose PMI or MIP independently. The insurance comes with the mortgage program you select.
A conventional loan with PMI can have an advantage if you expect to build equity quickly because PMI can eventually be canceled without replacing the mortgage. Conventional financing also does not generally require FHA's 1.75% upfront mortgage insurance premium.
An FHA loan can be useful when its qualification requirements and pricing work better for your credit profile or available down payment. The tradeoff is that FHA mortgage insurance can remain in place much longer, particularly when you start with less than 10% down, and you might need to refinance to a different loan type if you want to remove it.
Compare both loans using the same home price and down payment. Look at the interest rate, principal and interest, monthly mortgage insurance, upfront mortgage insurance, closing costs and how long you expect to keep the loan.
PMI and MIP Both Protect the Lender
PMI and MIP can make low-down-payment lending possible by reducing the lender's exposure to losses, but the insurance does not protect your home equity or make mortgage payments for you if you lose income.
If you stop making mortgage payments, you can still face late fees, credit damage and foreclosure. Mortgage insurance covers losses for the lender or mortgage insurer when the mortgage isn't fully repaid.
The distinction is useful when comparing mortgage insurance requirements by loan type, since VA and USDA loans use different fee and guarantee structures rather than conventional PMI or FHA MIP.
The Bottom Line
PMI and MIP serve a similar purpose but belong to different mortgage systems. PMI is private insurance associated with conventional loans and can generally be removed once you meet applicable equity and payment-history requirements. MIP is FHA mortgage insurance, includes upfront and annual components, and follows FHA's own duration rules.
The biggest practical difference is often how long you pay. Conventional PMI can potentially disappear as you build equity. On a typical FHA loan with less than 10% down, annual MIP generally remains for the mortgage term unless you refinance or pay off the loan. Compare the entire loan rather than mortgage insurance alone when deciding between FHA and conventional financing.
Frequently Asked Questions
Are PMI and MIP the Same Thing?
No. PMI is private mortgage insurance used with conventional mortgages. MIP is mortgage insurance charged on FHA loans. Both protect the lender against certain losses if you default, but their pricing and cancellation rules differ.
Is PMI Only for Conventional Loans?
The term PMI generally refers to private mortgage insurance on conventional financing. FHA loans use MIP instead. VA loans don't require monthly mortgage insurance, while USDA guaranteed loans use upfront and annual guarantee fees rather than PMI.
Can You Remove PMI Without Refinancing?
Yes. For many conventional mortgages, you can request PMI cancellation once your balance reaches the applicable 80% threshold and you satisfy the other requirements. PMI generally terminates automatically when the scheduled balance reaches 78% of the home's original value if you're current on payments.
Can You Remove FHA MIP Without Refinancing?
It depends on the original FHA LTV. For case numbers assigned on or after June 3, 2013, annual MIP generally ends after 11 years if the original LTV was 90% or less. If the original LTV was above 90%, annual MIP generally lasts for the loan term or 30 years, whichever comes first.
How Much Is FHA Upfront MIP?
For most standard FHA forward mortgages, upfront MIP is 1.75% of the base loan amount. The premium can generally be financed into the mortgage, although doing so increases the balance on which you pay interest.
Does FHA Mortgage Insurance Get Cheaper With Better Credit?
FHA MIP isn't individually priced based on credit score in the same way private mortgage insurance can be. FHA's MIP schedule instead uses factors such as the mortgage term, original LTV and loan amount. Your credit can still affect the mortgage rate and whether you qualify for the loan.
Is Conventional PMI Cheaper Than FHA MIP?
It depends on your loan and credit profile. PMI pricing varies, while FHA MIP follows a program schedule. Borrowers with stronger credit can find conventional PMI more competitive, while FHA financing can compare favorably for some borrowers with smaller down payments or weaker credit profiles.
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