PMI vs. MIP 2026: Key Differences, Costs & When Each Gets Cancelled

Q: What is the difference between PMI and MIP?

PMI (Private Mortgage Insurance) is required on conventional loans when you put less than 20% down. It is cancellable once you reach 20% equity. MIP (Mortgage Insurance Premium) is required on FHA loans — it has two components: an upfront fee (1.75% of loan) and annual fee (0.55%/year). The critical difference: PMI can be cancelled, but FHA MIP is permanent for most borrowers (if you put less than 10% down, MIP lasts the life of the loan).

Q: When can I cancel PMI on a conventional loan?

Under the Homeowners Protection Act (HPA), PMI must be automatically cancelled when your loan-to-value (LTV) reaches 78% based on original purchase price and original amortization schedule — no action needed. You can also request cancellation at 80% LTV with a written request (lender may require an appraisal). If your home has appreciated significantly, you can request PMI removal based on current value after 2 years with a new appraisal. Source: Homeowners Protection Act of 1998 (12 U.S.C. 4901), enforced by the CFPB.

Q: How long does FHA MIP last?

FHA MIP duration depends on your down payment: If you put less than 10% down, MIP lasts the entire life of the loan (30 years). If you put 10% or more down, MIP is removed after 11 years. The only way to eliminate FHA MIP permanently (with less than 10% down) is to refinance into a conventional loan once you reach 20% equity. This is called "FHA to conventional refinance" and is one of the most common reasons borrowers refinance.

Q: How much does PMI cost per month?

PMI costs 0.46%–1.50% of the original loan amount per year, depending on credit score, LTV, and loan type. For a $350,000 conventional loan with 5% down and 700 credit score: approximately 0.70% annually = $2,450/year = $204/month. With a 760+ credit score, PMI can be as low as $115/month on the same loan. PMI is removed once you hit 20% equity, so total PMI cost is limited.

Q: Is FHA or conventional better if I can put 10% down?

At 10% down, conventional usually beats FHA if your credit score is 680+. With conventional, PMI is cancelled automatically at 80% LTV (about 10–12 years of payments). With FHA at 10% down, MIP runs 11 years — similar. But FHA MIP (0.55%/yr) is often cheaper than conventional PMI for borrowers with 620–679 credit. Run the numbers both ways: if PMI on conventional is below 0.55%, go conventional. Above 0.55%, FHA may cost less until MIP ends.

⚡ The #1 Thing Most Borrowers Don't Know

FHA MIP never goes away if you put less than 10% down — regardless of how much equity you build. Conventional PMI disappears once you hit 20% equity. This single difference can determine which loan is cheaper over 10+ years.

✅ Conventional (PMI)

Reaches 20% equity in ~9 years → PMI cancelled → $204/mo saved forever

⚠️ FHA (MIP <10% down)

Reaches 20% equity in ~9 years → MIP continues → still paying $160/mo in year 30

PMI vs. MIP: Full Comparison Table (2026)

Feature	PMI (Conventional)	MIP (FHA)
Loan type	Conventional	FHA
Upfront cost	None (in most cases)	1.75% of loan amount
Annual cost	0.46–1.50% of loan/yr	0.55% of loan/yr (most)
Monthly cost on $350K loan	$134–$438/mo (avg $204)	$160/mo
Cancellation at 20% equity	Yes — automatic at 22%, or request at 20%	No (< 10% down)
Cancellation with 10%+ down	Yes — at 78% LTV automatically	After 11 years only
Removed at loan payoff	Yes (before payoff if 20%+ equity)	Only if ≥10% down AND 11 years passed
Can you avoid it?	Put 20% down, or use piggyback loan	Only by putting 10%+ down (11-year MIP)
Based on credit score?	Yes — higher score = lower PMI	No — flat rate regardless of credit
Tax deductible?	May be (check current IRS rules)	May be (check current IRS rules)
Best for credit score 580–679	PMI very expensive	MIP fixed at 0.55% — better deal
Best for credit score 720+	PMI very cheap (0.46–0.60%)	MIP same rate — conventional wins

10-Year Cost Comparison: $350,000 Home, 5% Down

🏛️ Conventional — 7.00%, 5% Down (700 credit)

Loan amount$332,500

PMI rate0.70%/yr = $194/mo

PMI cancelled at 80% LTV~Year 9 (month 108)

Total PMI paid$194 × 108 = $20,952

Rate vs FHA+0.50% higher (700 credit)

Total 10-yr MI cost$20,952

🏛️ FHA — 6.50%, 5% Down (700 credit)

Loan amount$337,125 (incl 1.75% UFMIP)

Annual MIP0.55%/yr = $155/mo

MIP cancelled?No — lifetime (< 10% down)

Total MIP paid (10 yrs)$155 × 120 = $18,600

Rate vs Conventional-0.50% lower

Total 10-yr MI cost$18,600 + continues after

🧮 Verdict at Year 10: FHA has paid $18,600 in MIP vs. conventional $20,952 in PMI — FHA wins narrowly in 10 years. At Year 30: FHA has paid $55,800 in lifetime MIP vs. conventional $20,952 (PMI stopped at year 9) — conventional wins by $34,848. The longer you keep the loan, the more FHA's lifetime MIP hurts. To compare real offers from both FHA and conventional lenders, takes 60 seconds.

FHA to Conventional Refinance: Escaping Lifetime MIP

The most common reason FHA borrowers refinance is to escape lifetime MIP. Once you've built 20% equity (through payments + appreciation), you can refinance into a conventional loan with no PMI. Here's the math:

📊 When Refinancing Out of FHA Makes Sense

• Current FHA MIP: $160/month ($1,920/year)

• Refinance cost: ~$4,000–$6,000 (closing costs)

• New conventional PMI: $0 (at 20% equity)

• Break-even: $5,000 ÷ $160/mo = 31 months (2.6 years)

→ If you plan to stay in the home 3+ years after refinancing, you save money by escaping FHA MIP.

Ready to check if refinancing out of FHA makes sense? Get a free FHA-to-conventional rate comparison in under 2 minutes.

Frequently Asked Questions

What is the difference between PMI and MIP?

PMI (Private Mortgage Insurance) is required on conventional loans when you put less than 20% down. It is cancellable once you reach 20% equity. MIP (Mortgage Insurance Premium) is required on FHA loans — it has two components: an upfront fee (1.75% of loan) and annual fee (0.55%/year). The critical difference: PMI can be cancelled, but FHA MIP is permanent for most borrowers (if you put less than 10% down, MIP lasts the life of the loan).

When can I cancel PMI on a conventional loan?

Under the Homeowners Protection Act (HPA), PMI must be automatically cancelled when your loan-to-value (LTV) reaches 78% based on original purchase price and original amortization schedule — no action needed. You can also request cancellation at 80% LTV with a written request (lender may require an appraisal). If your home has appreciated significantly, you can request PMI removal based on current value after 2 years with a new appraisal. Source: Homeowners Protection Act of 1998 (12 U.S.C. 4901), enforced by the CFPB.

How long does FHA MIP last?

FHA MIP duration depends on your down payment: If you put less than 10% down, MIP lasts the entire life of the loan (30 years). If you put 10% or more down, MIP is removed after 11 years. The only way to eliminate FHA MIP permanently (with less than 10% down) is to refinance into a conventional loan once you reach 20% equity. This is called "FHA to conventional refinance" and is one of the most common reasons borrowers refinance.

How much does PMI cost per month?

PMI costs 0.46%–1.50% of the original loan amount per year, depending on credit score, LTV, and loan type. For a $350,000 conventional loan with 5% down and 700 credit score: approximately 0.70% annually = $2,450/year = $204/month. With a 760+ credit score, PMI can be as low as $115/month on the same loan. PMI is removed once you hit 20% equity, so total PMI cost is limited.

Is FHA or conventional better if I can put 10% down?

At 10% down, conventional usually beats FHA if your credit score is 680+. With conventional, PMI is cancelled automatically at 80% LTV (about 10–12 years of payments). With FHA at 10% down, MIP runs 11 years — similar. But FHA MIP (0.55%/yr) is often cheaper than conventional PMI for borrowers with 620–679 credit. Run the numbers both ways: if PMI on conventional is below 0.55%, go conventional. Above 0.55%, FHA may cost less until MIP ends.

Compare FHA vs. Conventional — See Which Costs Less for You

Rates and MI costs vary by credit score. The only way to know which is truly cheaper is to get quotes for both — takes 60 seconds.

Compare FHA & Conventional Rates →

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Related Guides

Best Conventional Lenders 2026

Top 7 lenders to escape FHA MIP via refinance.

VA vs Conventional 2026

No PMI or MIP — see if VA beats both.

FHA-to-Conventional Refi

How to refinance out of lifetime MIP.

Advertiser disclosure: We may receive compensation from lenders when you use the comparison links on this page. This never affects our editorial guidance. PMI/MIP rules summarize HUD Handbook 4000.1 and the Homeowners Protection Act; cost figures are illustrative as of May 2026 and vary by credit score, LTV, and lender.

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PMI vs. MIP: The Key Difference That Could Cost You $40,000