What Is Mortgage Insurance Premium (MIP)?

Mortgage insurance premium (MIP) is the insurance you pay on every FHA loan, regardless of your down payment. It includes a 1.75% upfront premium and an annual premium between 0.45% and 1.05%. MIP protects the lender if you default on your loan.

On a $300,000 FHA loan, your upfront MIP is $5,250, which most borrowers roll into the loan balance. Your annual MIP at 0.55% adds roughly $137 per month. Unlike conventional PMI, FHA MIP typically stays for the life of the loan unless you put 10% or more down, in which case it drops off after 11 years.

Key Facts

• Upfront MIP: 1.75% of the base loan amount, usually financed into the loan
• Annual MIP range: 0.45%–1.05% depending on loan term, amount, and LTV
• Duration: Life of loan for down payments under 10%; 11 years for 10%+ down
• Payment method: Annual premium divided by 12 and added to your monthly payment
• Refund policy: Partial refund of upfront MIP available if you refinance within 3 years

Frequently Asked Questions

How is MIP different from PMI?

MIP applies to FHA loans and includes both an upfront and annual charge. PMI applies to conventional loans when you put less than 20% down. PMI cancels automatically at 78% LTV, while MIP usually lasts the entire loan term.

Can I avoid paying MIP on an FHA loan?

No. MIP is required on all FHA loans regardless of your down payment. If you want to eliminate mortgage insurance, you can refinance into a conventional loan once you have at least 20% equity in your home.

Is the upfront MIP paid out of pocket at closing?

Most borrowers finance the 1.75% upfront MIP into the loan balance rather than paying it out of pocket. On a $250,000 loan, that adds $4,375 to your total amount financed.