FHA Mortgage Insurance
What it costs, how long it lasts, and how to get out
FHA mortgage insurance is a required cost on every FHA loan. No exceptions.
Most borrowers know it exists.
Far fewer understand how long they’ll actually pay it.
This guide is for anyone weighing an FHA loan or already paying MIP on one.
If you put less than 10% down, FHA mortgage insurance stays on your loan for the full 30 years.
One down payment decision at closing can change your total MIP bill by more than $35,000.
In This Article
What Is FHA Mortgage Insurance, and Why Do You Pay It?
FHA mortgage insurance protects the lender, not you. If you stop making payments and the loan goes to foreclosure, the FHA’s Mutual Mortgage Insurance Fund reimburses the lender for the loss. That protection is what allows lenders to approve borrowers with lower credit scores and smaller down payments than conventional guidelines would normally allow.
FHA mortgage insurance is mandatory on every FHA loan. There’s no way around it based on income, credit score, or down payment size. You pay it because the FHA needs to fund the insurance pool that backs the entire program. According to the Federal Housing Administration’s most recent annual report to Congress, the Mutual Mortgage Insurance Fund maintained a capital ratio of 11.47% in fiscal year 2024, well above the 2% statutory minimum. That figure reflects just how many borrowers are paying into the program and how consistently they do so.
In fiscal year 2024, FHA facilitated mortgage credit for over 793,000 homebuyers and homeowners, according to HUD, with more than 82% of purchase loans going to first-time buyers. FHA mortgage insurance is what makes those approvals possible. But knowing the cost is mandatory is different from knowing how much it costs and how long it stays. That’s where most borrowers run into trouble.
What FHA Mortgage Insurance Actually Costs
The Upfront Premium
FHA mortgage insurance has two parts. The first is the Upfront Mortgage Insurance Premium, or UFMIP. The current rate is 1.75% of your base loan amount. Most borrowers roll this into the loan rather than paying it at closing.
On a $338,000 loan (a $350,000 home with 3.5% down), the UFMIP comes to about $5,915. That amount is added to your loan balance on day one. You won’t see it as a separate line item on your monthly statement, but you will pay interest on it for the life of the loan.
One detail most borrowers don’t know: if you refinance from one FHA loan into another FHA loan within three years, you may qualify for a pro-rated refund of the upfront premium. The refund applies as a credit toward the new loan’s UFMIP rather than cash back. The amount decreases the further you get from the original closing date, and it goes away entirely after three years.
The Annual Premium (Paid Monthly)
The second part is the Annual Mortgage Insurance Premium, collected in monthly installments. The rate depends on your loan term, your loan amount, and your loan-to-value ratio. In 2023, HUD reduced the standard annual MIP from 0.85% to 0.55% for most 30-year FHA borrowers, a significant reduction that saves the average borrower hundreds of dollars per year.
On a $338,000 loan at 0.55%, the annual premium runs about $1,859, or roughly $155 per month added to your payment on top of principal, interest, taxes, and homeowner’s insurance.
| Loan Term | Down Payment / LTV | Annual MIP Rate |
|---|---|---|
| 30-year | Less than 5% down (LTV above 95%) | 0.55% |
| 30-year | 5% to 10% down (LTV 90.01% to 95%) | 0.50% |
| 30-year | 10% or more down (LTV at or below 90%) | 0.50% |
| 15-year | Less than 10% down | 0.40% |
| 15-year | 10% or more down | 0.15% |
Rates per HUD Mortgagee Letter 2023-05, effective March 20, 2023.
In Colorado and Florida, most FHA borrowers finance within the standard loan limit tiers, so the rates above apply in most cases. Borrowers in high-cost areas, such as Eagle or Pitkin County in Colorado where 2026 FHA limits reach $1,249,125 for a single-family home, or Monroe County in Florida where the 2026 limit is $990,150, may encounter different rate tiers based on loan amount. Look up your county’s specific limit to confirm which rate applies before estimating your monthly payment.
Colorado FHA Loan Limits (2026)
| Property Type | 2026 FHA Limit |
|---|
Florida FHA Loan Limits (2026)
| Property Type | 2026 Loan Limit |
|---|
How Long FHA Mortgage Insurance Lasts
For FHA loans originated after June 3, 2013, the duration of MIP depends entirely on your down payment at closing. Less than 10% down means MIP for the full loan term. Ten percent or more limits it to 11 years. That one number at closing determines everything that follows.
Less Than 10% Down: MIP for the Life of the Loan
If you put less than 10% down, the annual MIP stays on your loan for the full 30 years. It doesn’t matter how much equity you build through payments. It doesn’t matter how much your home appreciates. Equity growth does not trigger cancellation for these loans. The only exits are selling the home, paying off the loan, or refinancing into a different loan type.
On a $350,000 home with 3.5% down, total monthly MIP over 30 years runs roughly $55,800. Add the UFMIP rolled into the loan balance and the total mortgage insurance cost exceeds $61,000.
10% or More Down: MIP Cancels After 11 Years
If you put 10% or more down at closing, the annual MIP cancels automatically after 11 years. That’s still a real cost, but it’s a fundamentally different number than 30 years.
Here’s what that comparison looks like in real numbers on the same home:
| Down Payment | Down Amount | Loan Amount | Monthly MIP | MIP Duration | Total MIP Cost |
|---|---|---|---|---|---|
| 3.5% | $12,250 | $337,750 | ~$155/mo | 30 years | ~$55,800 |
| 9% | $31,500 | $318,500 | ~$147/mo | 30 years | ~$52,920 |
| 10% | $35,000 | $315,000 | ~$131/mo | 11 years | ~$17,292 |
The gap between 9% down and 10% down is $3,500. But the difference in total lifetime MIP cost is more than $35,000. In our experience working with Colorado and Florida borrowers, this is one of the least-discussed trade-offs in the entire FHA decision. Borrowers who see those numbers side by side often find a way to close the gap before signing. The ones who don’t sometimes spend the next decade wishing they had.
A Note for Borrowers With Older FHA Loans
If your FHA loan originated before June 3, 2013, different rules apply. MIP on those loans cancels automatically when your loan-to-value ratio drops to 78%, through a combination of principal paydown and home appreciation. So if you have an older FHA loan and your home has gained value in a strong Colorado or Florida market, it may be worth contacting your servicer. You might be much closer to automatic cancellation than you expect.
A Pueblo West First-Time Buyer and the Down Payment Math That Changed Everything
A first-time buyer in Pueblo West had saved just over 9% of the purchase price on a $320,000 home. They were qualified, the rate was locked, and they were focused on getting to closing.
During a final loan review, a question came up: had they looked at what 10% down would do to their MIP? The answer was no. The numbers showed that $3,200 more at closing would limit MIP to 11 years instead of 30, a difference of more than $36,000 in total payments.
They had the funds. They had just been focused on keeping reserves comfortable. Once they saw the numbers laid out, the decision was easy.
FHA Mortgage Insurance vs. PMI: What’s Actually Different
FHA mortgage insurance and PMI on a conventional loan serve the same purpose, but they cancel under completely different rules. PMI drops automatically when your principal balance reaches 78% of the original home value. FHA MIP on loans originated after June 2013 with less than 10% down does not cancel based on equity at all.
The Consumer Financial Protection Bureau confirms that servicers are legally required to terminate PMI once that balance threshold is reached, as long as payments are current. Home appreciation can also work in your favor on a conventional loan: if your home gains enough value, you can request PMI removal at 80% LTV based on a new appraisal.
FHA MIP doesn’t work that way. A borrower with 35% equity in their home can still be paying FHA mortgage insurance every month, because the rule is tied to the original down payment at closing, not to what the home is worth today.
How Credit Score Changes the Cost Comparison
There’s one nuance worth understanding before you decide between programs: FHA MIP rates are credit-blind. The 0.55% annual rate applies whether your credit score is 640 or 760. Conventional PMI is different: rates vary based on credit score, and borrowers with lower scores can pay significantly more in PMI than they would in FHA MIP. So for buyers with credit scores in the mid-600s, FHA financing can produce a lower mortgage insurance cost than a conventional loan, even accounting for the longer MIP duration. For buyers with strong credit, the math often flips. If your score is below 680, run the FHA vs. conventional comparison before you commit. The monthly difference can be significant, and the right answer depends on your actual numbers, not on which program is generally considered better.
“We run the MIP vs. PMI comparison on almost every FHA conversation we have. For some borrowers, FHA comes out ahead even over 30 years because their credit score would push their PMI rate so high on the conventional side. For others, the math flips completely. The answer almost never comes from assumptions. It comes from running the actual numbers on that borrower’s specific situation.”
Reed Letson, Owner, Elevation Mortgage
How to Get Out of FHA Mortgage Insurance
For most FHA borrowers with less than 10% down, refinancing into a conventional loan is the only practical exit. You can’t request cancellation based on equity. Extra principal payments build equity faster, but they won’t remove MIP on post-2013 FHA loans. The only non-sale paths out are refinancing into a different loan type or paying off the loan in full.
What You Need to Refinance Out of MIP
To refinance from FHA to conventional and drop mortgage insurance entirely, you generally need two things. First, at least 20% equity in your home, whether from paying down the balance or from home appreciation. Second, a credit score that qualifies for conventional financing. Most lenders want to see 620 or above, and a higher score produces better rates and potentially no PMI at all on the conventional side. See what lenders look at when evaluating a refinance if you’re uncertain where you stand.
Colorado and Florida have seen meaningful home appreciation in many markets over the past several years. Some FHA borrowers have reached 20% equity faster than they expected, especially those who bought three to five years ago. If you haven’t checked your current loan-to-value ratio recently, it’s worth doing. You may have more options than you think.
The Break-Even Math
Refinancing costs money up front. Closing costs typically run 2% to 5% of the loan amount, according to the Consumer Financial Protection Bureau. If you’re saving $155 per month by eliminating MIP, and closing costs run $7,000, you break even in about 45 months. After that, you’re ahead every month.
That math works well if you plan to stay in the home. If you’re likely to move in the next two or three years, the savings may not cover the upfront cost. Staying on the FHA loan might be the better call. The decision depends on your specific break-even, not a general rule about whether refinancing is worth it.
One more option worth knowing: if you’re a veteran or active-duty service member, a refinance from FHA to VA may be possible without the 20% equity requirement. VA loans carry no monthly mortgage insurance at all. That path isn’t available to everyone, but for those who qualify, it’s often the most favorable exit from FHA MIP available.
Working with a lender who regularly handles FHA-to-conventional and FHA-to-VA refinances is the clearest way to know which scenario actually puts the most money back in your pocket.
What This Means for Your Situation
Whether MIP lasts 11 years or 30 years comes down to one number decided at closing: your down payment. If you’re within a few thousand dollars of 10%, running the math before you commit could be the most financially significant thing you do in the entire homebuying process. And if you already have an FHA loan, finding out how close you are to refinancing out of MIP is worth doing sooner rather than later.
Run the Numbers Before You Start Shopping
Our first-time buyer tools let you estimate your payment, check affordability based on your income, and compare loan options side by side — before you ever talk to a lender.
Open the First-Time Buyer ToolsCommon Mistakes to Avoid
Assuming MIP Cancels Like PMI
Many FHA borrowers expect mortgage insurance to drop off once they reach 20% equity, the way PMI does on a conventional loan. For FHA loans originated after June 2013 with less than 10% down, that’s not how it works. Equity growth does not trigger cancellation. MIP stays until you sell, refinance, or pay off the loan entirely.
Stopping at 9% Down Without Checking the Math
Borrowers who’ve saved 9% down often assume they’ve covered their bases and focus on closing. But the difference between 9% and 10% isn’t just $3,500, it’s the difference between 30 years of MIP and 11. Most people who see those numbers laid out side by side find a way to close that gap before signing.
Waiting Too Long to Evaluate a Refinance
Borrowers who’ve built equity and improved their credit since closing sometimes stay on FHA loans far longer than necessary, assuming conditions aren’t right yet. The right time to check isn’t when it feels right, it’s when you’ve reached 20% equity, regardless of what rates are doing.
Questions to Ask Your Lender
- With my planned down payment, how long will MIP stay on my loan?
- How close am I to the 10% down threshold, and what would it take to get there before closing?
- What equity level would I need to refinance into a conventional loan and eliminate MIP entirely?
- Given my credit score, is conventional financing with PMI actually cheaper than FHA with MIP over the life of the loan?
- What would the break-even timeline look like if I refinanced out of MIP today?
- If I qualify for a VA loan, would FHA-to-VA refinancing be a better path than FHA-to-conventional?
20% Down Is Not the Only Option
Most buyers assume they need more saved than they actually do. Our down payment guide covers every real option available including programs most buyers never hear about.
See Your Down Payment OptionsFrequently Asked Questions
No. FHA mortgage insurance protects the lender, not you. If your loan goes to foreclosure, the FHA insurance fund compensates the lender for the loss. As the borrower, you remain responsible for the debt. MIP gives you no coverage for job loss, financial hardship, or any other circumstance that makes it difficult to make your payments.
No. FHA mortgage insurance is required on every FHA loan regardless of down payment size. A larger down payment does affect how long you pay it: 10% or more at closing limits MIP to 11 years rather than the full loan term. To avoid mortgage insurance entirely, you’d need a conventional loan with 20% down, or a VA loan if you qualify.
The biggest difference is cancellation. PMI on a conventional loan must be removed automatically when your balance reaches 78% of the original home value, and you can request it at 80%. FHA MIP for loans originated after June 2013 with less than 10% down does not cancel based on equity: the only exits are refinancing or paying off the loan. FHA MIP rates are also fixed regardless of credit score, while conventional PMI varies based on your score.
Yes. Refinancing from FHA into a conventional loan is the most common exit strategy. You generally need at least 20% equity and a credit score that qualifies for conventional financing. Closing costs typically run 2% to 5% of the loan amount, so calculating the break-even point before you commit matters. Veterans may also be able to refinance from FHA to VA, which carries no monthly mortgage insurance at all.
Only if you made a down payment of 10% or more when you took out the loan. In that case, the annual MIP cancels automatically after 11 years of payments. If your down payment was less than 10%, MIP runs for the full loan term and does not cancel at any equity milestone or time threshold. The upfront MIP is a one-time charge at closing and does not recur after that.
