FHA Mortgage Insurance
What It Costs and How Long It Lasts
A clear look at MIP — upfront costs, monthly payments, and your options for getting out
FHA mortgage insurance is one of the most misunderstood costs in home buying. Most borrowers know it exists. Far fewer know how much it truly costs over time — or that it might follow them for the entire life of their loan. If you're considering an FHA loan, understanding how FHA mortgage insurance works before you commit could save you tens of thousands of dollars in decisions you can still make.
What Is FHA Mortgage Insurance, and Why Does It Exist?
FHA mortgage insurance is not designed to protect you. It protects the lender. If you stop making payments and the loan goes into foreclosure, the FHA 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 they'd otherwise accept.
According to HUD's Federal Housing Administration, FHA endorsed over 765,000 single-family forward purchase mortgages in fiscal year 2023 — which shows just how widely used these loans are.
So FHA mortgage insurance isn't optional. It's mandatory on every FHA loan, regardless of how much you put down. You pay it because the government needs to fund the insurance pool that backs the entire program. That's a reasonable trade-off for a lot of borrowers — but only if you understand what you're actually agreeing to.
What Does FHA Mortgage Insurance Actually Cost?
The Upfront Premium
FHA mortgage insurance has two parts. The first is the Upfront Mortgage Insurance Premium, or UFMIP. Per current HUD guidelines, the UFMIP equals 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 — which is roughly what you'd borrow on a $350,000 home with 3.5% down — the UFMIP comes to about $5,915. That amount gets added to your loan balance from day one.
The Annual Premium (Paid Monthly)
The second part is the Annual Mortgage Insurance Premium, charged monthly. According to HUD Mortgagee Letter 2023-05, the annual MIP rate for most 30-year FHA loans is 0.55% of the loan balance for loan-to-value ratios above 95%, and 0.50% for LTVs at or below 95%.
On that same $338,000 loan at 0.55%, the annual premium runs about $1,859. That works out to roughly $155 per month added to your payment — on top of principal, interest, taxes, and homeowner's insurance.
| Loan Term | Loan-to-Value (LTV) | Annual MIP Rate |
|---|---|---|
| 30-year | 90% or below (10%+ down) | 0.50% |
| 30-year | Above 90% up to 95% | 0.50% |
| 30-year | Above 95% (less than 5% down) | 0.55% |
| 15-year | 90% or below | 0.15% |
| 15-year | Above 90% | 0.40% |
Want to see how MIP affects your monthly payment on a real loan amount?
Use our mortgage calculator to run the numbers →How Long Does FHA Mortgage Insurance Last?
This is where many borrowers get caught off guard. The duration of FHA mortgage insurance depends almost entirely on your down payment at the time you close the loan.
Less Than 10% Down: MIP for the Full Loan Term
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. It doesn't matter how long you've paid. Per FHA guidelines, once you're in this category, MIP is a feature of the loan — not something you age out of by paying down your balance.
According to HUD's FY2023 Annual Report to Congress, the vast majority of FHA purchase mortgages carry loan-to-value ratios above 95%, which means most FHA borrowers fall into the lifetime-MIP category.
On a $350,000 home with 3.5% down, the total monthly MIP over 30 years adds up to roughly $55,800. That's before you count the UFMIP rolled into your loan balance.
10% or More Down: MIP Cancels After 11 Years
If you put 10% or more down, the annual MIP cancels automatically after 11 years (132 monthly payments). That's still a meaningful cost — but far less than paying MIP for 30 years.
Here's what that looks like in real numbers on the same $350,000 home:
| Down Payment | Down Amount | Loan Amount | Monthly MIP (approx.) | MIP Duration | Total Monthly 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 just $3,500. But that small gap changes your total MIP cost by over $35,000. In our experience working with Colorado and Florida borrowers, this is one of the most under-discussed tradeoffs in the entire FHA decision — and the borrowers who understand it often find a way to close that gap before they sign.
FHA Mortgage Insurance vs. PMI: The Key Difference
A lot of people assume FHA mortgage insurance works like Private Mortgage Insurance (PMI) on a conventional loan. Both are forms of mortgage insurance. But the cancellation rules are completely different.
According to the CFPB, lenders must automatically cancel PMI on conventional loans once a borrower reaches 78% loan-to-value — a protection that does not apply to FHA mortgage insurance. So on a conventional loan, if your home appreciates and your balance drops, PMI goes away. On a 30-year FHA loan with less than 10% down, MIP stays — regardless of how much equity you accumulate.
That's the core issue. Many borrowers choose FHA because of easier qualification rules, then spend years assuming MIP will eventually cancel the way PMI does. It won't. That misunderstanding can cost a lot of money over time.
How to Get Out of FHA Mortgage Insurance
For most FHA borrowers with less than 10% down, there's only one practical exit path: refinance into a conventional mortgage once you've built enough equity.
What You Need to Refinance Out of MIP
To refinance from FHA to conventional and drop MIP entirely, you generally need two things: at least 20% equity in your home and a credit score that qualifies for conventional financing. Your home may have appreciated enough to get you there faster than you'd expect — especially in strong Colorado and Florida markets.
The Break-Even Math
Refinancing isn't free. According to Freddie Mac, closing costs on a refinance typically range from 2% to 5% of the loan amount. So if you're saving $155 per month by eliminating MIP, and your closing costs run $6,000, you break even in about 39 months. After that, you're ahead every month.
That math works well for borrowers who plan to stay in the home. But if you might move in two or three years, the refinance may not pencil out. You'll want to run the numbers carefully before committing. Our mortgage refinance page walks through what that process typically looks like.
The short version: the earlier you can get to 20% equity and conventional-qualifying credit, the more sense a refinance makes. Waiting too long means you've already paid MIP for years when you could have exited sooner.
See What Actually Affects Your Mortgage Approval
FHA and conventional loans have very different rules around credit, income, and down payment. If you're trying to figure out which path makes sense for your situation, this resource breaks down exactly what lenders look at — without the sales pressure.
What Actually Affects Your ApprovalFrequently Asked Questions About FHA Mortgage Insurance
Does FHA mortgage insurance protect me if I can't make my payments?
No. FHA mortgage insurance protects the lender, not you. If you stop making payments and the loan goes into foreclosure, the FHA insurance fund compensates the lender for the loss. As a borrower, you remain responsible for the debt. MIP does not give you any coverage if you lose your job or face financial hardship.
Can I avoid FHA mortgage insurance with a bigger down payment?
No — FHA mortgage insurance is required on all FHA loans regardless of down payment size. However, putting 10% or more down does significantly reduce the total cost. With 10% or more down, the annual MIP cancels after 11 years rather than running for the full loan term. If you want to avoid MIP entirely, a conventional loan with 20% down is the only path — and some conventional options with lower down payments carry PMI that can be cancelled once you reach 20% equity.
How is FHA MIP different from PMI on a conventional loan?
The biggest difference is cancellation. PMI on a conventional loan must be removed once you reach 78% LTV — your equity growth, whether from payments or home appreciation, can trigger that cancellation. FHA MIP does not work that way. For most FHA borrowers with less than 10% down, MIP stays for the life of the loan regardless of equity. The only way out is to refinance to a conventional mortgage.
Can I remove FHA mortgage insurance by refinancing?
Yes — refinancing from FHA to a conventional loan is the primary exit strategy for most borrowers. To do this, you typically need at least 20% equity and a credit score that qualifies for conventional financing. Closing costs on a refinance generally run 2% to 5% of the loan amount, so you'll want to calculate how long it takes to break even on those costs compared to the monthly MIP you'd save.
Does FHA mortgage insurance automatically go away after 11 years?
Only if you made a down payment of 10% or more at the time 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%, the annual MIP runs for the full loan term — it does not cancel at 11 years or when you reach a specific equity level. The upfront MIP (UFMIP) is a one-time charge and does not recur after closing.