1.75% UFMIP, 0.55% Annual MIP, Cancellation Rules, Refi Exit Strategy
FHA Mortgage Insurance (MIP): Rates, Duration, and When It Falls Off
FHA MIP costs 1.75% upfront plus 0.55% annually on most FHA loans — and it is permanent for loans with less than 10% down. On a $300,000 loan, total MIP over 10 years exceeds $20,000. The only exit: refinance into conventional when you reach 20% equity and 620+ credit. Plan the refinance exit from day one.
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MIP Rates 2026
- Upfront (UFMIP): 1.75% of the base loan amount — $5,250 on a $300,000 loan, can be financed into the balance
- Annual MIP: 0.55% for most borrowers (30-year term, LTV above 95%) — collected monthly through escrow payments
- Lower rate tiers: 0.50% for LTV 90–95%; 0.45% for 15-year terms above 90% LTV; 0.15–0.40% for 15-year below 90% LTV
- Action: The UFMIP can be financed but it increases your loan balance and you pay interest on it for the loan’s life
Duration Rules
- 10%+ down: MIP falls off automatically after 11 years of payments — this is the only scenario where FHA MIP is not permanent
- Less than 10% down: MIP is permanent for the life of the loan — it never falls off regardless of your equity or payment history
- Post-2013 rule: All FHA loans originated after June 3, 2013 follow these duration rules — no early cancellation by request
- Action: If you put less than 10% down (most FHA borrowers), refinancing to conventional is the only way to eliminate MIP
Conventional PMI Comparison
- PMI cancellation: Conventional PMI cancels automatically at 78% LTV and by request at 80% — FHA MIP does not cancel on most loans
- Rate basis: Conventional PMI rates vary by credit score — FHA MIP is the same rate regardless of credit, which helps lower-score borrowers
- Long-term cost: Over 30 years, FHA MIP costs $30,000–$50,000+ while conventional PMI costs $10,000–$20,000 before cancellation
- Action: Once you reach 620+ credit and 20% equity, refinance from FHA to conventional to eliminate the permanent MIP
The Refi Exit Strategy
- Requirements: 620+ credit score, 20%+ equity (based on current appraisal), and qualification at current conventional rates
- Timing: Most borrowers reach the exit threshold in 3–7 years depending on down payment, appreciation, and principal paydown
- Cost savings: Eliminating MIP saves $125–$200/month on a $300,000 loan — $1,500–$2,400/year in permanent savings
- Action: Set a calendar reminder to check your equity and credit annually — the FHA-to-conventional exit saves thousands per year
Frequently Asked Questions
Can I cancel FHA MIP early?
Does my credit score affect the MIP rate?
Is the UFMIP refundable if I refinance?
The Bottom Line Up Front
FHA mortgage insurance costs 1.75% upfront (UFMIP) plus 0.55% annually on most FHA loans originated in 2026. For borrowers who put less than 10% down — which is the vast majority of FHA borrowers using the 3.5% minimum — the annual MIP is permanent and never falls off regardless of your equity position, payment history, or time in the loan.
On a $300,000 FHA loan at 3.5% down, total MIP over 10 years exceeds $20,000 in combined upfront and annual premiums. The only exit strategy is refinancing into a conventional loan once you reach 20% equity and 620+ credit — eliminating the MIP entirely. Conventional PMI cancels automatically at 78% LTV. FHA MIP does not. Plan the conventional refinance exit from the day you close the FHA loan. The sooner you reach the equity and credit thresholds, the sooner you stop paying $125–$200/month in permanent mortgage insurance that no longer serves a purpose.
How Does FHA Mortgage Insurance Work?
FHA mortgage insurance protects the lender — not the borrower. When an FHA loan defaults, HUD reimburses the lender for losses from the Mutual Mortgage Insurance Fund, which is funded entirely by borrower MIP payments. Every FHA borrower contributes to this pool regardless of whether they personally default, and the insurance benefit goes to the lender, not to you.
Unlike private mortgage insurance on conventional loans, FHA MIP is mandated by federal policy and cannot be waived, negotiated, or reduced by individual lenders. Every FHA borrower at the same loan term, LTV, and loan amount pays the same MIP rate — credit score does not factor into the MIP calculation. This is one of FHA’s advantages for lower-credit borrowers: a 580-score buyer pays the same MIP as a 780-score buyer, whereas conventional PMI rates penalize lower scores significantly.
How Each MIP Component Works
- Upfront MIP (1.75%): Calculated on the base loan amount before the UFMIP is added. On a $290,000 loan, UFMIP is $5,075. When financed, the total loan becomes $295,075 and interest accrues on the entire amount including the financed UFMIP for the life of the loan
- Annual MIP (0.55% for most borrowers): The annual rate is divided by 12 and multiplied by the outstanding principal balance each month. As your balance decreases through amortization, the dollar amount of monthly MIP decreases slightly — but the rate percentage stays fixed
- Escrow collection: Your servicer collects MIP as part of your monthly escrow payment alongside property taxes and homeowners insurance. The MIP amount appears as a separate line item on your mortgage statement each month
- UFMIP refund window: If you refinance within the first 3 years, HUD provides a partial refund of the upfront MIP. The refund decreases monthly from 80% in month 1 to 0% at month 36. After 3 years, no refund is available
What Are the 2026 MIP Rate Tables?
FHA MIP rates are determined by loan term, loan-to-value ratio at origination, and base loan amount. The vast majority of FHA borrowers (30-year term, 3.5% down, base loan over $625,500) pay the 0.55% annual rate. Lower rates apply to 15-year terms and higher down payments, but few FHA borrowers access these tiers because FHA’s primary user base is low-down-payment 30-year borrowers.
| Term | LTV Range | Base Loan | Annual MIP Rate |
|---|---|---|---|
| 30-year | >95% | ≤$625,500 | 0.55% |
| 30-year | >95% | >$625,500 | 0.55% |
| 30-year | 90.01–95% | Any | 0.50% |
| 30-year | ≤90% | Any | 0.50% |
| 15-year | >90% | Any | 0.40% |
| 15-year | ≤90% | ≤$625,500 | 0.15% |
The upfront MIP is 1.75% across all tiers, loan terms, and LTV ratios. There are no exceptions or reduced UFMIP tiers. The only variation is for FHA Streamline refinances, which carry a reduced UFMIP of 0.01% (effectively $0) when the borrower is refinancing from an FHA loan originated before May 31, 2009 — a diminishing pool of borrowers.
Deal Math
Total FHA MIP cost over 10 years on a $300,000 loan at 3.5% down: $5,250 upfront MIP + approximately $15,200 in cumulative annual MIP payments = roughly $20,450 in total mortgage insurance cost. On the same $300,000 loan as a conventional with a 720 credit score and 5% down, total PMI over the same period would be approximately $10,800 — and it cancels at 78% LTV. The FHA MIP premium over conventional PMI exceeds $9,600 over 10 years and continues growing indefinitely because FHA MIP never cancels.
When Does FHA MIP Actually Fall Off?
For FHA loans originated after June 3, 2013 (which includes every current FHA origination), the MIP cancellation rules are based entirely on the original down payment percentage at closing — not on how much equity you have built over time through payments and appreciation.
If you put 10% or more down at origination, MIP falls off automatically after 11 years (132 months) of payments. No action is required — the servicer removes it from your escrow calculation after the 132nd payment posts. If you put less than 10% down — which is the standard 3.5% FHA minimum that the vast majority of FHA borrowers use — MIP is permanent for the life of the loan. It does not fall off at 78% LTV, it does not fall off at 20% equity, and it does not fall off at any point in the loan’s amortization schedule. The only way to eliminate it is to refinance out of the FHA program entirely.
Lender Reality Check
Many FHA borrowers believe MIP cancels at 80% LTV like conventional PMI. It does not. This is the most common and most expensive misconception in FHA lending. A borrower who put 3.5% down on a $350,000 FHA loan and pays for 25 years before this realization has paid approximately $42,000 in MIP that could have been eliminated through a conventional refinance years earlier. Set a reminder to evaluate your conventional refinance eligibility at years 3, 5, and 7.
How Does the Refinance-to-Conventional Exit Strategy Work?
The FHA-to-conventional refinance is the standard exit strategy for eliminating permanent MIP. When you refinance from FHA to conventional, the FHA loan is paid off and replaced with a conventional loan that either has cancellable PMI (if LTV is above 80%) or no mortgage insurance at all (if LTV is at or below 80%).
The requirements to execute the exit: 620+ credit score for conventional eligibility (680+ for the best rate pricing), sufficient equity for the target LTV based on a new appraisal at current market value, and ability to qualify at current conventional interest rates with your income and DTI. The timing depends on three factors: how fast you build equity (through payments and home value appreciation), how fast you improve your credit score, and whether current conventional rates make the refinance financially beneficial after accounting for total closing costs.
Most FHA borrowers reach the exit threshold in 3–7 years depending on down payment amount, local home price appreciation, and credit improvement trajectory. The refinance eliminates MIP immediately — saving $125–$200/month on a typical $300,000 loan balance. Over the remaining 23–27 years, the MIP savings range from $35,000 to $65,000 in total depending on how early you execute the exit.
How Does FHA MIP Affect How Much House You Can Afford?
MIP is included in your total monthly housing payment for DTI calculation purposes. The annual MIP adds approximately $137/month on a $300,000 loan (0.55% annual rate). This $137 counts against your front-end and back-end DTI the same as any other housing cost — reducing the maximum loan amount you can afford within the DTI ceiling.
On a practical level, the MIP effectively reduces your purchasing power by approximately $25,000–$35,000 compared to what you could afford on a conventional loan without mortgage insurance at the same DTI. However, FHA’s higher DTI tolerance (56.99% via TOTAL Scorecard versus 45–50% conventional) often more than compensates for the MIP’s DTI drag — meaning FHA borrowers frequently qualify for more despite the MIP cost because the DTI ceiling is dramatically higher.
File Guidance
Plan the conventional refinance exit from the day you close your FHA loan. Set annual reminders to check: (1) What is my estimated home value? (Use recent comparable sales in your neighborhood.) (2) What is my current loan balance? (Check your monthly statement.) (3) What is my current credit score? (Pull from annualcreditreport.com.) When your estimated LTV reaches 80% or below and your credit score reaches 620+, request a refinance quote from at least three conventional lenders. If the rate and payment math work after closing costs, execute the refinance and eliminate MIP permanently.
The Bottom Line
FHA MIP costs 1.75% upfront plus 0.55% annually and is permanent on loans with less than 10% down. Total MIP cost over 30 years exceeds $45,000 on a $300,000 loan. Unlike conventional PMI, FHA MIP does not cancel at 78% LTV — the only exit is refinancing to conventional.
FHA MIP is not a reason to avoid FHA when you need it to buy a home — the program’s low down payment and credit flexibility serve a critical purpose. But it is a reason to plan your exit from FHA the day you close. Build equity, improve your credit, and refinance to conventional as soon as the math supports it. Every month you remain in FHA after reaching conventional eligibility is a month of unnecessary MIP that you are choosing to pay.
Frequently Asked Questions
Can I pay the UFMIP in cash instead of financing it?
Yes. Paying the 1.75% UFMIP in cash at closing reduces your loan balance and the amount of interest you pay over the life of the loan. On a $300,000 loan, paying $5,250 in cash saves approximately $3,000–$4,000 in lifetime interest compared to financing the UFMIP. However, most borrowers choose to finance it to preserve cash for other needs.
Does FHA MIP apply to FHA Streamline refinances?
Yes — both UFMIP and annual MIP apply to FHA Streamline refinances. The UFMIP on a Streamline is the standard 1.75% for most borrowers. The annual MIP rate is determined by the new loan’s terms and LTV. Streamline refinances do benefit from a UFMIP refund credit if done within 3 years of the original FHA loan closing.
How much does FHA MIP add to my monthly payment?
At the standard 0.55% annual rate, MIP adds approximately $137/month on a $300,000 loan, $183/month on a $400,000 loan, and $229/month on a $500,000 loan. These amounts decrease slightly each month as the principal balance amortizes, but the reduction is gradual.
Is the 11-year cancellation rule retroactive?
The 11-year cancellation applies only to FHA loans originated after June 3, 2013 with 10%+ original down payment. Loans originated before that date follow different rules. The cancellation is not retroactive — it applies based on the origination date and original LTV, not current equity.
Does making extra payments help eliminate MIP faster?
Extra payments reduce your principal balance faster and build equity sooner — but they do not change when MIP cancels. On loans with less than 10% down, MIP is permanent regardless of balance reduction. Extra payments help by reaching the 80% LTV threshold for conventional refinance sooner, which is the actual exit from MIP.
Why is FHA MIP permanent while conventional PMI is not?
The Homeowners Protection Act (HPA) mandates automatic PMI cancellation at 78% LTV on conventional loans. FHA is a federal program not subject to HPA — HUD sets its own MIP policies through administrative rulemaking. HUD made MIP permanent in 2013 to strengthen the Mutual Mortgage Insurance Fund after losses during the housing crisis.