PMI vs MIP — what's the difference?

PMI: conventional loan insurance, removable at 80% LTV. MIP: FHA loan insurance, includes upfront 1.75% + annual. With <10% down, MIP for LIFE of loan.

Why is FHA MIP for life?

Since 2013, FHA charges MIP for life of loan if down payment <10%. Escape only via refinance to conventional. FHA's trade-off for low down payment + lenient credit.

When does FHA beat conventional?

Credit 580-660 (conventional PMI brutally priced), down payment 3.5%, high DTI (45-50%), past credit issues 2-4 years old. For these scenarios, FHA only realistic option.

Should I refinance from FHA?

Yes when (1) Credit improves to 660+, AND (2) LTV drops below 80%. Refinance to conventional eliminates MIP. Model breakeven on closing costs before refinancing.

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PMI vs MIP Comparison Calculator

Q: Why is FHA MIP for life?

Since 2013, FHA charges MIP for life of loan if down payment <10%. Escape only via refinance to conventional. FHA's trade-off for low down payment + lenient credit.

Q: When does FHA beat conventional?

Credit 580-660 (conventional PMI brutally priced), down payment 3.5%, high DTI (45-50%), past credit issues 2-4 years old. For these scenarios, FHA only realistic option.

Q: Should I refinance from FHA?

Yes when (1) Credit improves to 660+, AND (2) LTV drops below 80%. Refinance to conventional eliminates MIP. Model breakeven on closing costs before refinancing.

Q: Is this tool free?

Yes. 100% free, no sign-up. All math runs in your browser — your loan data never leaves your device.

Compare Private Mortgage Insurance (PMI) on conventional loans vs Mortgage Insurance Premium (MIP) on FHA loans. Same idea — different rules. The lifetime cost difference can hit $20K-$50K+.

PMI vs MIP — Key Differences

Conventional PMI: Required when down payment <20%. Cost: 0.3-1.5% of loan annually (depends on credit score and LTV). Removable at 80% LTV by request, automatic at 78%. Average duration on loan: 6-15 years. MIP (FHA): Required on all FHA loans. Two parts: Upfront MIP 1.75% of loan amount + Annual MIP 0.45-0.85% of balance. With <10% down, MIP for LIFE of loan. With 10%+ down, MIP for 11 years.

Real Cost Comparison

$350K loan, 5% down ($17,500). Conventional 30-year at 7.0%: $2,800 PMI/year × 7 years until 80% LTV = $19,600. FHA 30-year at 6.75% (FHA usually slightly lower rate): $6,125 UPMIP + $2,700 annual × 30 years = $87,125. FHA total = $87K vs Conventional $20K. Difference: $67K over loan life. FHA's main advantage: down payment 3.5% (vs 5% conventional min), more lenient credit (580+ vs 620+).

When FHA Beats Conventional

(1) Credit score 580-660: FHA pricing significantly better — conventional PMI quote at 660 credit is brutally expensive. (2) Down payment 3.5% but not 5%: FHA only option. (3) High debt-to-income (45-50%): FHA more flexible. (4) Past credit issues: FHA looks back 2 years for bankruptcy, 3 for foreclosure (conventional 4+/7+). For these scenarios, FHA cheaper upfront despite lifetime MIP cost — buyer wouldn't qualify for conventional anyway.

Strategy: FHA Now, Refinance Later

Common play: take FHA loan today, pay MIP, refinance to conventional when (a) Credit improves to 660+, AND (b) Loan-to-value drops below 80% (via payments + appreciation). Refinancing eliminates MIP. Net result: get FHA's lenient qualification today, escape lifetime MIP via refi in 3-5 years. Works in flat/rising market; fails if rates spike and refi cost exceeds savings. Always model refi breakeven before assuming this path.

PMI vs MIP Comparison Calculator: 2026 Numbers After the FHA MIP Cut

The PMI vs MIP comparison calculator above uses the post-March 2023 FHA annual MIP rates (lowered 30 bps to 0.55% on most 30-year >95% LTV loans per FHA Mortgagee Letter 2023-02), which materially changes the break-even vs conventional PMI in 2026 — the spread is roughly $1,250/year on a $400K loan instead of $2,400/year pre-2023. Conventional PMI rates are CFPB-tracked at 0.3%–1.5% of loan depending on credit + LTV; pull a real PMI quote from your lender (LPI factor) before assuming the rack rate.

When Conventional PMI Beats FHA MIP (Even at Low Down)

If your credit score is 720+ AND you can stretch to 5% down, conventional almost always wins in 2026 — Fannie Mae's PMI factor at 720+ credit on 95% LTV runs ~0.55%, which roughly equals current FHA annual MIP but is REMOVABLE at 80% LTV under the Homeowners Protection Act. FHA MIP at <10% down stays for the life of the loan. The PMI vs MIP comparison calculator flips conventional-favored at roughly 720 credit + 5% down + 7-year hold; FHA-favored at credit <680 OR 3.5% down. Run yours at the exact credit/down combo — the gray-zone is narrower than most blog posts suggest.

Sources: HUD FHA Mortgagee Letter 2023-02, CFPB Conventional Loans Guide, HUD FHA Handbook 4000.1. Last updated 2026-06-30.