Guide · Homebuying
FHA mortgage insurance (MIP): what it costs and how long it lasts
Every FHA loan carries two insurance premiums. Here is what each one costs on a real example, when MIP ends, and the choices that lower it.
By the CalcLedger editorial team · Updated September 2026 · 5 min read · Examples use illustrative rates · How we calculate
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Key takeaways
- FHA loans charge an upfront premium of 1.75% of the base loan, usually added to the loan, plus an annual premium paid monthly.
- For most 30-year FHA loans the annual rate is 0.55% with less than 5% down and 0.50% with 5% or more down.
- With 10% or more down, annual MIP ends after 11 years. With less, it lasts for the life of the loan unless you refinance.
- On a $350,000 home with 3.5% down at 6.25%, MIP starts at about $154 a month and totals about $36,000 over 30 years, before the upfront premium.
FHA loans, insured by the Federal Housing Administration, are popular with first-time buyers because they allow a down payment as low as 3.5% with a credit score of 580 or higher, and they are more forgiving of lower scores than most conventional loans. The price of that flexibility is mortgage insurance, called MIP (mortgage insurance premium). Unlike private mortgage insurance on a conventional loan, FHA insurance is charged in two parts and follows fixed rules set by HUD. The rates below are those in effect for loans endorsed on or after March 20, 2023, per HUD Mortgagee Letter 2023-05, and they still apply in 2026.
The two FHA premiums
Upfront MIP (UFMIP) is 1.75% of the base loan amount, the amount you borrow before the premium. On a $337,750 base loan it is $5,911. Almost everyone adds it to the loan rather than paying it in cash, so the loan becomes $343,661 and you pay interest on the premium too.
Annual MIP is quoted as a yearly percentage but paid monthly with your mortgage payment. HUD calculates it on the average balance you will owe during each year of the loan, so the monthly amount falls slightly every year as you pay the loan down. The rate depends on the loan term, the loan amount and your loan-to-value ratio (LTV), which is the loan divided by the home's value.
Annual MIP rates for loans longer than 15 years
| Base loan amount | Down payment (LTV) | Annual MIP | How long it lasts |
|---|---|---|---|
| $726,200 or less | Less than 5% (LTV over 95%) | 0.55% | Life of the loan |
| $726,200 or less | 5% to under 10% (LTV over 90% to 95%) | 0.50% | Life of the loan |
| $726,200 or less | 10% or more (LTV 90% or less) | 0.50% | 11 years |
| Over $726,200 | Less than 5% | 0.75% | Life of the loan |
| Over $726,200 | 5% to under 10% | 0.70% | Life of the loan |
| Over $726,200 | 10% or more | 0.70% | 11 years |
Source: HUD Mortgagee Letter 2023-05. Loans of 15 years or less pay lower rates: 0.15% with 10% or more down and 0.40% with less, for loans up to $726,200.
What MIP costs on a $350,000 home
Here is the same $350,000 home with a 30-year FHA loan at an illustrative 6.25%, with the upfront premium added to the loan, at three down payments. Monthly MIP is the first-year amount; the total adds up every monthly premium for as long as MIP lasts.
| Down payment | Annual rate | First-year MIP | MIP lasts | Total annual MIP paid |
|---|---|---|---|---|
| 3.5% ($12,250) | 0.55% | $154 a month | 30 years | about $36,000 |
| 5% ($17,500) | 0.50% | $138 a month | 30 years | about $32,200 |
| 10% ($35,000) | 0.50% | $130 a month | 11 years | about $15,900 |
Two lessons stand out. First, moving from 3.5% to 5% down lowers the annual rate from 0.55% to 0.50%. Second, and much bigger, reaching 10% down cuts the total by more than half because the premium stops after 11 years instead of running for the full 30. If you can get to 10%, it is worth running both scenarios in the FHA loan calculator.
How to get rid of FHA mortgage insurance
If you put down 10% or more, annual MIP stops on its own after 11 years. If you put down less, the premium stays for the life of the loan, and the usual way out is to refinance into a conventional loan once you have about 20% equity, from paying down the loan, rising home values or both. A conventional loan with 20% equity needs no mortgage insurance at all. Whether that refinance makes sense depends on the rate you can get and the closing costs; the refinance calculator shows the break-even point.
Refinancing from one FHA loan into another within three years can earn a partial refund of the upfront premium, which shrinks each month after closing. Outside that case the upfront premium is not refunded.
FHA MIP vs. conventional PMI
With a strong credit score and 5% or more down, a conventional loan often costs less, because PMI can be removed once you reach 20% equity and conventional loans have no upfront premium. With a lower score, FHA's fixed premium can be cheaper than the PMI a conventional lender would price in. The honest answer is to compare the full monthly payment and the total cost over the years you expect to keep the loan. Our guide to FHA vs. conventional loans walks through that comparison.
Where MIP shows up on your paperwork
On your Loan Estimate, the upfront premium appears in the loan costs section, and the monthly premium is part of the "Mortgage Insurance" line in the projected payments table. If you finance the upfront premium, the loan amount on page 1 already includes it. Check that the loan amount equals your base loan plus 1.75%, and that the monthly mortgage insurance is close to what the calculator shows for the first year.
Frequently asked questions
Is FHA mortgage insurance tax deductible?
Tax rules for mortgage insurance premiums have changed over the years. Check current IRS guidance or ask a tax professional before counting on a deduction.
Does MIP go down over time?
Yes, slightly. The rate stays the same, but it is applied to a smaller average balance each year as you pay down the loan.
Can I pay the upfront MIP in cash instead?
Yes. Paying it at closing keeps your loan smaller, but most buyers prefer to keep cash for the down payment, closing costs and reserves.
Do FHA streamline refinances pay MIP?
Yes. A streamline refinance is still an FHA loan, so it carries upfront and annual MIP, although a refund of part of the earlier upfront premium may apply if you refinance within three years.
Run your own numbers in the FHA loan calculator, which applies these HUD rates and shows your full monthly payment.
Sources
- U.S. Department of Housing and Urban Development: Mortgagee Letter 2023-05: FHA annual mortgage insurance premium reduction
- U.S. Department of Housing and Urban Development: FHA and housing resources
- Consumer Financial Protection Bureau: Mortgages
Rules, limits and program details are checked against these official sources. Example numbers are calculated by CalcLedger with the formulas on our how we calculate page. Read our editorial policy.
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