FHA Mortgage Insurance (MIP): How It Works, What It Costs, and How to Remove It

Last updated: September 15, 2026

Mortgage insurance is an added cost of an FHA loan that requires upfront and monthly premiums, increasing the loan’s total cost over time. 

Mortgage insurance for an FHA loan is commonly called a mortgage insurance premium, or MIP. MIP is required for all FHA loan borrowers, with some borrowers paying MIP for the duration of their loan.

FHA loans have the benefit of a low down payment, but consider all costs involved, including up-front and long-term mortgage insurance and all fees. Ask your home mortgage consultant to help you compare the overall costs of all your home financing options.

FHA mortgage insurance helps protect lenders against certain losses if you can’t repay your loan. Since FHA loans are backed by a government agency (the Federal Housing Administration), lenders are encouraged to offer mortgages with more flexible eligibility criteria, such as lower credit scores or smaller down payments.

FHA mortgage insurance comes in two payment types: upfront and annual MIP. If you obtain an FHA mortgage, you will be responsible for both forms of MIP.

• Upfront: The upfront MIP is a one-time payment equal to 1.75% of your loan amount. It’s typically paid at closing, or it can be added to your loan balance and repaid with your monthly mortgage payments.
• Annual: An annual MIP is a recurring fee that’s divided into monthly payments. The total cost of your annual MIP will depend on your loan amount, down payment, and loan term.

As stated above, your upfront MIP is 1.75% of your loan amount. Annual MIP rates range from 0.15%-0.75% and will vary based on the details of your loan. Review the tables below for a more detailed breakdown of annual MIP rates:

Let’s say you purchase a home for $500,000 and make a 10% or $50,000 down payment. Your down payment has lowered your FHA loan total to $450,000. Let’s also suppose your loan has a 30-year loan term. Using the information above, you can anticipate the following MIP costs:

• Upfront MIP: $7,875 (1.75% of $450,000). This one-time payment can be paid in full at closing or added to your loan balance. (Note that if you finance the upfront MIP into the loan, your monthly cost over time may be higher because interest would apply to the higher loan balance.)
• Annual MIP: $2,250 each year, or roughly $188 a month (0.5% of $450,000). In the table marked 15-Year Loan Terms or Higher, the first row shows that the annual MIP rate is 0.5% for loans under $726,200 with a 10% down payment. You would only have to pay the $2,250 annual MIP for the first 11 years of your loan; after that, your annual MIP payments would stop.

If your down payment is 10% or more of your home’s sale price, you are typically required to pay FHA mortgage insurance for the first 11 years of your loan before it’s canceled. If your down payment is under 10%, you’re generally required to pay FHA mortgage insurance for the life of your loan. This applies to all FHA loans with case numbers assigned after June 2, 2013.

A common mistake that borrowers make is confusing an FHA mortgage insurance premium (MIP) with private mortgage insurance (PMI). While both are home insurance policies, they apply to different types of loans and have some key differences. PMI is available only for conventional loans and applies only in certain scenarios.

FHA mortgage insurance can be difficult to completely remove. It is required for the life of your FHA loan if your down payment is less than 10% of your home’s price. If your down payment is 10% or more, you are only required to have FHA mortgage insurance for the first 11 years of your loan. 

One way to potentially remove FHA mortgage insurance is by refinancing to a conventional loan. You will need to meet conventional loan and lender eligibility requirements to refinance. If you meet the eligibility requirements and have at least 20% equity in your home, you may be able to refinance to a conventional loan without requiring PMI payments.

While refunds are fairly uncommon for mortgage insurance, you may be able to receive a partial refund on your upfront MIP if you refinance your FHA loan with an FHA streamline refinance within three years of your loan date. Note that after three years, the eligibility window for a refund closes. The refund amount decreases over time. Talk with your lender to learn more and to see if you qualify.

Mortgage insurance premium tax treatment can change over time and may depend on the tax year, your income, whether you itemize deductions, and other factors. Before relying on any potential tax benefit, consult a tax advisor.

It’s important to understand your mortgage insurance responsibilities if you choose to obtain an FHA loan, including how much you are required to pay and the length of your payments. If you have any additional questions about FHA mortgage insurance, talk with your lender today for more information. 

Thinking about other types of insurance? Check out our guide to the essential types of insurance for homebuyers.

Taking steps to prepare for homeownership? Review our financial check-up guide as you get organized.

If you extend your loan term, you may pay more interest over the life of your loan.

If you are a service member on active duty, an eligible spouse, partner, or dependent, or currently receiving SCRA benefits, please consult with your legal advisor prior to seeking a refinance of your existing mortgage loan. In some cases, a refinance may impact your eligibility for benefits under the Servicemembers Civil Relief Act or applicable state law.