MIP is FHA’s equivalent of conventional PMI, but with critical differences in cost structure and cancellation rules. Most FHA borrowers eventually refinance to conventional in part to escape lifetime MIP.
MIP structure
- Upfront MIP (UFMIP) — 1.75% of the loan amount, paid at closing or financed into the loan. Charged once
- Annual MIP — 0.55-1.05% of the loan balance, divided into 12 monthly payments and added to PITI. Charged ongoing
Annual MIP rates by loan term and LTV (2026)
- 30-year, LTV under 90%: 0.50% annual
- 30-year, LTV 90-95%: 0.50% annual
- 30-year, LTV over 95%: 0.55% annual
- 15-year, LTV under 90%: 0.15% annual
- 15-year, LTV over 90%: 0.40% annual
MIP cancellation
This is where MIP differs sharply from PMI:
- Loans with 10%+ down payment — MIP terminates after 11 years
- Loans with less than 10% down payment — MIP is required for the life of the loan, regardless of LTV
- Pre-2013 FHA loans — different rules apply (older borrowers may have already terminated MIP)
Why borrowers refi from FHA to conventional
For an FHA borrower with less than 10% down at original purchase, MIP is permanent. Once the LTV drops below 80% through appreciation or paydown, refinancing to a conventional loan eliminates MIP entirely (assuming no PMI required at the new conventional LTV). The savings on monthly MIP often exceeds the cost of refinancing in 2-3 years, making this a high-value refinance motion to surface to FHA borrowers.
