Mortgage Insurance Premium Calculator: FHA MIP Costs Explained

Conventional loans have PMI. FHA loans have MIP — and the two work very differently. The biggest difference is that conventional PMI eventually disappears when you hit 20% equity. FHA's Mortgage Insurance Premium, in most cases, sticks around for the life of the loan. That's a cost most buyers don't fully understand when they choose an FHA loan because of its lower down payment requirement.

Here's how to calculate your actual MIP cost before you sign.

How FHA Mortgage Insurance Premium Works

FHA loans carry two separate insurance charges:

1. Upfront Mortgage Insurance Premium (UFMIP) This is a one-time fee charged at closing, equal to 1.75% of the base loan amount for most FHA loans. It's the same regardless of your credit score, down payment size, or loan term.

On a $350,000 FHA loan, the UFMIP is $6,125. Most borrowers don't pay this out of pocket — it gets rolled into the loan balance, meaning you finance it and pay interest on it over the life of the loan.

2. Annual Mortgage Insurance Premium (Annual MIP) This is a recurring charge added to your monthly mortgage payment. The rate varies based on your loan term, loan-to-value ratio, and loan amount.

For most buyers in 2026 using a 30-year FHA loan with a down payment under 10%:

The rate drops slightly for loans under $150,000 (0.15% to 0.40%) and applies specific tiers for 15-year terms.

The Calculation That Actually Matters

To calculate your total MIP cost:

Step 1: Upfront MIP Base loan amount × 1.75%

For a $300,000 loan: $300,000 × 0.0175 = $5,250

Step 2: Monthly MIP Base loan amount × MIP rate ÷ 12

For a $300,000 loan at 0.55%: $300,000 × 0.0055 ÷ 12 = $137.50/month

Step 3: Duration This is where FHA gets expensive. If you put down less than 10%, annual MIP lasts the entire 30-year loan term — you cannot cancel it based on equity accumulation the way you can cancel PMI.

If you put down exactly 10% or more, MIP cancels after 11 years.

On a 15-year term with any down payment below 10%, MIP also lasts the full term.

Total MIP cost example (30-year, under 10% down, $300,000 loan):

• Upfront: $5,250
• Monthly: $137.50 × 360 months = $49,500
• Total: $54,750

That's a substantial cost for protection that benefits the lender, not you.

FHA vs. Conventional PMI: Which Costs More?

This comparison shifts based on your credit score.

With a credit score below 680, FHA MIP often wins because conventional PMI rates become punitive at that credit tier — sometimes reaching 1.5% or more annually. If you're credit-constrained, FHA's predictable 0.55% rate may be your lowest option.

With a credit score above 720, conventional loans typically beat FHA. A buyer with excellent credit might pay 0.3% for PMI on a conventional loan vs. 0.55% MIP on an FHA loan — and that PMI disappears at 20% equity, while MIP doesn't.

A practical break-even: if you plan to build equity quickly and reach 20% LTV in under 8 years, a conventional loan with PMI usually wins on total cost even if the monthly MIP rate looks similar initially.

The Permanent MIP Trap

Before June 2013, FHA MIP was cancelable once you hit 22% equity, similar to conventional PMI rules. After a policy change in 2013, FHA made MIP permanent for most borrowers — it runs the full loan term regardless of how much equity you accumulate.

This matters enormously for buyers who plan to stay in their home long-term. On a 30-year loan purchased with 5% down, you'll pay MIP for all 30 years even if your home appreciates significantly and your equity reaches 40%, 50%, or 80%.

The only way to escape MIP before the loan pays off is to refinance into a conventional loan once you have 20% equity. The question to model is whether the refinancing costs (2–5% of the loan amount in closing costs) plus the conventional rate difference justify the permanent removal of MIP payments.

UK, CA, and AU Context

Canada (CMHC Insurance): Canada's equivalent is CMHC mortgage default insurance, required on all insured mortgages. The premium scales sharply by LTV:

• 5–9.99% down: 4.00% of loan amount
• 10–14.99% down: 3.10%
• 15–19.99% down: 2.80%

This is a one-time upfront premium added to the loan — no monthly component — but it's significantly larger than US UFMIP.

Australia (LMI): Lenders Mortgage Insurance premiums in Australia are quoted as a one-time cost capitalized into the loan. Moving from 10% down to 5% down on a $600,000 property can increase the LMI premium from approximately $9,800 to over $31,000 — and since it's added to the loan balance, you pay compound interest on it for 30 years.

New Zealand (Low Equity Premium): NZ lenders charge a Low Equity Premium or Margin on loans above 80% LTV — either a one-time fee or an ongoing rate loading on the interest rate itself until you hit 20% equity.

Calculating Your True Monthly PITI

FHA buyers often underestimate their true payment because lenders quote the principal and interest. Add MIP and you get a more accurate picture.

On a $350,000 FHA purchase with 3.5% down at 6.5% interest:

• Down payment: $12,250
• Base loan: $337,750
• UFMIP added (1.75%): $5,911 → adjusted loan: $343,661
• Monthly P&I at 6.5%: $2,172
• Monthly MIP (0.55%): $157
• Estimated taxes + insurance: varies by location
• Monthly housing payment before T&I: $2,329

The MIP adds $157/month — equivalent to a 0.55% rate increase on the loan. Over 30 years, that's over $56,000 in additional payments.

Running these numbers before you commit to an FHA loan — and comparing against conventional alternatives — is one of the 10 essential calculations every buyer should complete before signing a purchase contract.

The Mortgage Math & Affordability Calculator Toolkit includes worksheets for calculating both upfront MIP and total MIP over the loan life, alongside PMI cancellation timelines and conventional vs. FHA comparison scenarios.

When FHA Still Makes Sense

FHA isn't always the wrong choice. If you have:

• A credit score below 620 (conventional loans become inaccessible)
• Limited cash reserves and need the lower 3.5% down payment
• Moderate income and can't qualify for a larger conventional loan at current rates

Then FHA provides access to homeownership that conventional loans don't. The key is understanding what you're trading: the permanent MIP is a real, calculable cost, not an abstract penalty. Know the number before you sign.