PMI and FHA MIP, compared
Both premiums insure the lender when the down payment is small. Private mortgage insurance is a conventional-loan premium with a federal cancellation rule. FHA mortgage insurance is a government premium with a duration set at the start.
The monthly line is easy to treat as one charge with two names. It is not. Private mortgage insurance, PMI, is arranged on a conventional loan. Mortgage insurance premium, MIP, is what the Federal Housing Administration charges on an FHA loan. The borrower pays in both cases. The lender is the one protected if the loan defaults. Who sets the end date, whether anything is due upfront, and what happens when you pay extra are different. The PMI removal calculator and the FHA MIP calculator answer those questions separately. A single “mortgage insurance” field that ignores the program will use the wrong end date.
Who charges it, and what is due at the start
On a conventional loan, PMI is the usual requirement when the loan starts above 80 percent of the value, which is a down payment under 20 percent. The premium is set by the insurer and the loan, not by a HUD table. This site’s payment calculator asks you to type the annual premium as a percent of the loan. It does not look up a quote. There is no standard upfront PMI in that calculator. Some conventional loans use lender-paid mortgage insurance instead, which is a different arrangement and is outside the borrower-paid cancellation statute.
An FHA forward loan charges an upfront premium, a percentage of the base loan amount, and an annual premium paid every month. HUD’s current table sets the annual rate from the term and the loan-to-value ratio, and it sets how long the annual premium lasts. The upfront premium can be paid in cash or added to the loan. Adding it raises the balance and the interest. It is not a point, and it is not a lender fee. The CFPB describes mortgage insurance generally as a cost of borrowing that is typical when the down payment is under 20 percent. That description covers the reason the premium exists. The program handbook covers the amount.
How each one ends
Borrower-paid PMI on a loan the Homeowners Protection Act covers has two endings, in 12 U.S.C. § 4902. You may request cancellation, in writing, on the date the principal balance is first scheduled to reach 80 percent of the original value, based on the amortization schedule from closing. You can request it sooner if extra payments have actually brought the balance to 80 percent. The servicer can require a good payment history and, for a request based on the actual balance, evidence that the value has not declined. If you never write, the premium can continue past that date.
The same statute requires the servicer to end borrower-paid PMI when the balance is first scheduled to reach 78 percent of the original value, if you are current, even if you never asked. That date follows the original schedule. Extra payments do not move it earlier. If the premium is still in place at the midpoint of the term, it ends then if you are current. The original value is generally the lesser of the contract price and the appraised value at consummation. A later rise in the market does not, by itself, move the 78 percent date.
FHA annual MIP, for a case number assigned on or after June 3, 2013, does not use 80 or 78 percent. Mortgagee Letter 2013-04 sets the period from the original loan-to-value ratio, measured on the base loan before any financed upfront premium. At or below 90 percent, the annual premium lasts until the end of the term or 11 years, whichever is first. Above 90 percent, it lasts until the end of the term or 30 years, whichever is first. Paying ahead does not cancel a life-of-loan premium, and it does not shorten the 11 years. The FHA MIP removal guide walks that rule. Loans with earlier case numbers can still be on the cancellation policy that letter replaced.
Worked example
One house, $320,000, with $16,000 down, a 6.5 percent note rate, and a 30-year term. The rate is typed, not quoted. The conventional version treats $320,000 as the original value and $304,000 as the loan, and it types a PMI premium of $130 a month so the dollar total has something to multiply. The FHA version finances the upfront premium and reads the annual premium from HUD’s table.
- Starting loan-to-value ratio on the base amounts: $304,000 ÷ $320,000 = 95%. That is above 80 percent, so the conventional loan is in the PMI case, and it is above 90 percent, so the FHA loan is on the life-of-loan side of HUD’s line.
- Conventional PMI. Eighty percent of the original value is $256,000, reached at month 124 (year 11), February 2037 if the first payment is November 2026. That is the written-request date on the original schedule. Seventy-eight percent is $249,600, at month 135 (year 12), January 2038. Premiums of $130 a month through the automatic month add up to $17,550.
- FHA. Base loan $304,000. Upfront premium $5,320.00, financed, so the total loan is $309,320.00. Annual rate 0.5%, charged for the life of the loan. First-year monthly MIP is $126.03, and the annual premiums over the years they are charged add up to $29,826, before the upfront premium.
The conventional premium in this example can end on the 78 percent date without a new loan. The FHA annual premium on this down payment does not. The monthly FHA amount also steps down with the scheduled balance, while the $130 conventional premium was typed as a flat dollar amount. A real PMI bill can be flat or can change with the insurer’s schedule. The cancellation month is the statutory one either way. The two “total premium” figures are not a reason to pick a program. One of them depends on a premium you type. The other depends on HUD’s table and on a life-of-loan duration. Taxes, the note rate you are actually offered, and the cash at closing are not in either total.
Where the labels get swapped
A servicer statement may say “mortgage insurance” for either premium. The loan type on the note, or on the original Loan Estimate, is the label that matters: conventional, or FHA. VA loans are a third case. VA charges a funding fee, not PMI and not FHA MIP, and some borrowers are exempt from that fee. The VA funding fee calculator uses VA’s table. It does not belong in either cancellation rule on this page.
Lender-paid mortgage insurance, a second lien, and a request that depends on a new appraisal are outside the automatic PMI schedule. FHA programs the calculator excludes, including many streamline refinances of older FHA loans, follow their own premium rules. A refinance from FHA to conventional replaces MIP with whatever the new loan requires, including PMI if the new loan is still above 80 percent, and it replaces the old loan with a new one. That is a refinance question, not a cancellation of the FHA premium in place.