MIP vs. PMI
PMI and MIP are both mortgage insurance, both protect the lender, and both show up when your down payment is small. The resemblance ends there. PMI belongs to conventional loans, prices by your credit score, and cancels once you build equity. MIP belongs to FHA loans, charges everyone the same, adds a 1.75 percent upfront premium, and on most FHA loans lasts as long as the loan does.
That last difference is the one that moves real money, and it's the one buyers hear about only after closing.
The Basics
- PMI comes with conventional loans; MIP comes with FHA loans, plus a 1.75 percent upfront premium
- PMI cancels at 20 to 22 percent equity; most FHA loans carry MIP for the life of the loan
- With 10 percent or more down, FHA MIP ends after 11 years instead of never
- Refinancing into a conventional loan is the standard exit from life-of-loan MIP
The Differences That Matter
| PMI, conventional | MIP, FHA | |
|---|---|---|
| Upfront premium | None | 1.75% of the loan amount |
| Monthly premium priced by | Credit score and down payment | Loan amount, term, and LTV; same at any score |
| Cancels at 20% equity | Yes, by request | No |
| Ends automatically | At 22% equity, or the loan's midpoint | After 11 years with 10%+ down; otherwise life of loan |
| Standard exit | Request removal, free | Refinance into a conventional loan |
Per HUD's premium schedule, every FHA purchase loan pays the 1.75 percent upfront premium, which most buyers roll into the loan; our guide to that fee follows where it goes. The annual premium varies with the loan's size, term, and down payment, and the duration rule does the real sorting: less than 10 percent down means MIP for the life of the loan, while 10 percent or more down ends it after 11 years.
PMI plays by the Homeowners Protection Act instead: request cancellation at 20 percent equity, automatic termination at 22, midpoint backstop regardless. The full removal playbook covers the mechanics.
Which One Costs Less
Credit score decides most head-to-head matchups. PMI prices in score bands, so a buyer with strong credit gets PMI near the bottom of the typical range and usually beats MIP comfortably. A buyer with a lower score faces PMI priced near the top of the range, and MIP's flat pricing can win the monthly comparison, which is a big part of why FHA loans attract credit-building buyers.
Then duration re-decides it. A slightly cheaper monthly MIP that runs 30 years loses to a slightly pricier PMI that cancels in year five. Whenever the monthly numbers look close, the buyer who expects to build equity should lean conventional, and the honest comparison is total insurance paid over the years you'll actually hold the loan.
The exit changes the math too. Life-of-loan MIP is escapable: once equity reaches 20 percent, refinancing into a conventional loan removes mortgage insurance entirely. It just costs a refinance, so the trade rides on where rates sit when you get there. The deeper mechanics of both products' pricing quirks live in our Q&A on why people hate MIP, and the FHA loan overview covers the rest of the program.
MIP vs. PMI: A Real World Example
Two buyers each purchase a $300,000 home with 5 percent down, borrowing $285,000.
The first has strong credit and takes a conventional loan. Her PMI lands near the low end of the typical range, roughly $90 a month, and she cancels it in year five as equity builds. Total insurance cost: about $5,400, plus nothing upfront.
The second has a thinner credit file and takes an FHA loan. His upfront premium adds about $4,990 to the loan at 1.75 percent, his annual MIP runs comparable to her PMI each month, and because he put less than 10 percent down, the monthly charge has no end date. In year six, with 20 percent equity and agreeable rates, he refinances into a conventional loan and the MIP disappears with the FHA loan itself.
Neither buyer chose wrong. FHA's flat pricing got the second buyer a home his score would have made expensive conventionally; the exit just had to be planned instead of requested. That's the practical difference between the two products: PMI ends with a letter, MIP ends with a strategy.
Common Questions About MIP and PMI
Common questions about how FHA's MIP differs from conventional PMI, which costs less, and how buyers exit each one.
