FHA MIP vs Conventional PMI: 30-Year Cost Calculator

FHA MIP duration depends entirely on your original down payment at loan origination. This rule has been in place since HUD Mortgagee Letter 2013-04 and was not changed by the 2024-04 premium rate update.

The 10% threshold is permanent and applies to the original down payment, not your current LTV. You cannot reach 20% equity later and claim the 11-year duration retroactively. The only path to eliminating MIP on a less-than-10%-down FHA loan is refinancing into a conventional loan.

Why does this matter so much? Because 83% of FHA purchase borrowers put less than 10% down (HUD annual report data). The overwhelming majority of FHA borrowers are in the life-of-loan MIP bucket. This is the rule that every competitor mentions in passing. We dedicate an entire page to it because it represents the single largest financial consequence of the FHA vs conventional decision.

FHA has two distinct mortgage insurance charges, and many borrowers conflate them:

UFMIP (Upfront Mortgage Insurance Premium)

• 1.75% of the base loan amount, per HUD ML 2024-04
• Paid at closing or rolled into the loan (approximately 99% of borrowers roll it in)
• On a $300,000 loan: $5,250 (rolled in, loan becomes $305,250)
• Partially refundable if you refinance within the first 36 months (declining scale: 80% refund month 1, declining to zero at month 36)
• This refund is applied to the new loan's UFMIP, not paid in cash

Annual MIP (Charged Monthly)

• 0.55% per year for 30-year loans at LTV under 95% (per HUD ML 2024-04)
• 0.50% per year for 30-year loans at LTV 95% or above (less common since most FHA puts less than 5% down)
• Charged on the current outstanding balance, not the original loan amount
• Declines slightly each year as the balance amortises
• Month 1 example on $305,250: $305,250 x 0.55% / 12 = $140/month
• Month 360 (year 30): approximately $30/month on the residual balance

Conventional PMI is required when LTV exceeds 80% at origination. Unlike FHA MIP, it has a built-in termination date tied to your loan balance, not your loan age. Key differences:

• No upfront premium: Conventional PMI is monthly only (unless single-premium option is chosen). No equivalent to FHA's 1.75% UFMIP rolled into your balance.
• Rate varies by FICO: 0.28-0.35% at 720+ FICO, 0.45-0.55% at 680-719, 0.70-0.95% at 640-679, 1.0-1.5% at 620-639 FICO at 95% LTV. These are MGIC/Arch MI published rate tiers for April 2026.
• Automatic cancellation at 78% LTV: Per the Homeowners Protection Act (12 USC 4902), PMI cancels when your balance reaches 78% of the original purchase price. No action required.
• Requested cancellation at 80% LTV: You can request removal with a current appraisal at 80% LTV. Costs approximately $500 for the appraisal. Saves up to 2 years of PMI payments vs waiting for automatic cancellation.

With 5% down, 720 FICO, 3% annual appreciation on a $300k home: automatic cancellation at 78% LTV occurs at approximately month 96 (year 8). Requested removal at 80% LTV can be triggered at approximately month 78 (year 6.5). Total PMI paid in the requested-removal scenario: approximately $7,000-9,000 including the appraisal cost.

Honesty requires acknowledging the counter-argument. If you plan to sell or refinance within 5 years, the MIP-for-life rule is largely irrelevant. In the first 5 years:

• FHA total MIP (years 1-5): approximately $8,100 (annual MIP only, not UFMIP)
• Conventional total PMI (years 1-5): approximately $7,000-9,000

The difference in the first 5 years is under $1,000. The FHA advantage (lower rate by 0.1-0.3%, easier qualification, lower down payment threshold) can easily offset this in a 5-year window. The MIP-for-life argument is most powerful for borrowers who plan to hold 15-30 years without refinancing.

The strategic implication: if you are entering an FHA loan with a clear plan to refinance to conventional at 20% equity (typically year 4-6 with 3% appreciation), the life-of-loan MIP exposure is capped at 5-6 years plus $5,250 UFMIP, which is structurally comparable to conventional PMI. See the FHA-to-conventional refi page for the breakeven math.

Refinancing from FHA to conventional at 20% equity eliminates MIP entirely. On a $300,000 home with 3.5% FHA at 6.8% and 3% annual appreciation, the sequence looks like this:

At year 5 with LTV at 79%, a conventional refi at 80% LTV (no PMI) is possible. Closing costs approximately $5,000. Monthly MIP savings: $135/month. Break-even: 37 months. After break-even, every month saves $135 vs staying in FHA. Remaining MIP on FHA if not refinancing: approximately $35,000 over the next 25 years.