If you’re considering an FHA loan, you’ll encounter a unique cost: Mortgage Insurance Premium (MIP).
Unlike conventional loans, FHA mortgages require both an upfront premium and an annual premium — regardless of down payment size.
In this guide, you’ll learn exactly how MIP works, how it affects your payment, and how to calculate it using the FHA Mortgage Calculator
1. What Is FHA MIP?
MIP (Mortgage Insurance Premium) protects the lender, not the borrower, in case of default — allowing FHA to approve loans with down payments as low as 3.5%.
FHA charges two separate types of MIP:
Upfront MIP (UFMIP): A one-time fee added to your loan at closing.
Annual MIP: Charged monthly as part of your mortgage payment.
2. Current FHA MIP Rates for 2025
The Federal Housing Administration (FHA) reduced MIP rates in 2023, and those lower premiums continue through 2025.
| Loan Term | Down Payment | Annual MIP (≤ $726,200) | Annual MIP (> $726,200) |
|---|---|---|---|
| ≤ 15 years | ≥ 10% | 0.15% | 0.40% |
| ≤ 15 years | < 10% | 0.40% | 0.65% |
| 30 years | ≥ 10% | 0.50% | 0.70% |
| 30 years | 5–9.99% | 0.55% | 0.75% |
| 30 years | < 5% | 0.55% | 0.75% |
Upfront MIP (UFMIP): 1.75% of the base loan amount (usually financed into the loan).
Example:
Loan amount: $300,000
Upfront MIP = 1.75% × $300,000 = $5,250
→ New loan balance = $305,250
💡 The FHA Mortgage Calculator automatically adds this cost to your total loan and monthly payment.
3. Example: FHA Loan with MIP Breakdown
Scenario:
Home price: $350,000
Down payment: 3.5% ($12,250)
Base loan: $337,750
Rate: 6.5%
Annual MIP: 0.55%
| Cost Type | Amount | Notes |
|---|---|---|
| Base loan | $337,750 | 96.5% LTV |
| Upfront MIP (1.75%) | +$5,911 | Financed into loan |
| New total loan | $343,661 | Used to calculate payment |
| Monthly principal & interest | $2,170 | Fixed portion |
| Monthly MIP | $158 | 0.55% ÷ 12 |
| Total Payment (PITI) | $2,328/mo | Before taxes/insurance |
4. MIP Duration: When (and If) It Can Be Removed
Unlike PMI on conventional loans, FHA’s MIP rules depend on your down payment and loan term.
| Loan Term | Down Payment | MIP Duration |
|---|---|---|
| 30 years | < 10% | Life of loan (cannot cancel) |
| 30 years | ≥ 10% | 11 years |
| 15 years | Any down payment | 11 years (if <10%), else removable at 11 years |
So if you put less than 10% down, you’ll pay MIP for the entire life of the loan — unless you refinance into a conventional mortgage later.
🔁 Use the Conventional Loan Calculator to see when refinancing could eliminate FHA MIP.
5. How MIP Affects Your Monthly Payment
| Base Loan | Interest Rate | Monthly P&I | MIP | Total Payment |
|---|---|---|---|---|
| $200,000 | 6.5% | $1,264 | $92 | $1,356 |
| $300,000 | 6.5% | $1,896 | $138 | $2,034 |
| $400,000 | 6.5% | $2,528 | $184 | $2,712 |
That extra MIP charge can raise your monthly payment by $100–$200, depending on loan size and rate.
Use the Mortgage Payment Calculator to see how MIP shifts your affordability window.
6. Refinancing to Remove MIP
You can’t request MIP removal from FHA directly — the only way to eliminate it early is to refinance into a conventional loan once your loan-to-value (LTV) drops below 80%.
Ideal timing:
After 2–3 years of on-time payments
When home appreciation pushes your LTV below 80%
If rates are stable or lower than your FHA rate
Many homeowners use this strategy once their equity grows enough to qualify for conventional financing.
7. FHA vs Conventional: MIP vs PMI
| Feature | FHA MIP | Conventional PMI |
|---|---|---|
| Upfront Fee | 1.75% | None |
| Annual Rate | 0.15–0.75% | 0.3–1.0% |
| Removal | 11 years or lifetime | Automatically at 78% LTV |
| Credit Sensitivity | None | Higher score = lower PMI |
| Down Payment | As low as 3.5% | As low as 3% |
8. Case Study: FHA MIP vs Conventional PMI Over 10 Years
| Loan Type | Starting Balance | Monthly Payment | MIP/PMI Removed | 10-Year Total Cost |
|---|---|---|---|---|
| FHA | $350,000 | $2,328 | Never (lifetime) | $279,000 |
| Conventional | $350,000 | $2,150 | Year 6 | $266,000 |
9. How to Use the FHA Mortgage Calculator
To see your full MIP impact:
Enter home price, down payment, and interest rate.
Select “Include Upfront MIP” to roll it into the loan balance.
Review “Monthly MIP” under payment details.
Compare results to a conventional loan scenario.
The calculator displays both monthly and lifetime MIP costs side-by-side.
10. Key Takeaways
FHA loans require two MIP types: upfront (1.75%) and annual (0.15–0.75%).
Most borrowers pay MIP for 11 years or the life of the loan.
MIP increases monthly payments by $100–$200 on average.
Refinancing to conventional is the only way to remove MIP early.
Always compare with Conventional Loan Calculator to estimate your long-term savings.
FAQ
What is the current FHA MIP rate in 2025?
Upfront MIP is 1.75% of the loan amount; annual MIP ranges from 0.15–0.75% depending on term and down payment.Can I cancel FHA MIP?
Only if you put 10% down (removed after 11 years) or refinance into a conventional loan.Does FHA MIP depend on credit score?
No. MIP rates are the same regardless of credit — a major FHA advantage for lower-score borrowers.Can I finance the upfront MIP?
Yes — most borrowers roll it into their loan instead of paying it at closing.