What Is FHA Mortgage Insurance Premium?
FHA mortgage insurance premium (MIP) is an additional fee you pay to protect the lender’s financial interests in case you default on your FHA loan.
FHA Mortgage Insurance Premium (MIP)
An FHA loan requires that borrowers are require to pay two types of mortgage insurance premiums:
An upfront MIP. In 2022, the upfront MIP is equal to 1.75% of the base loan amount, borrowers can either pay the upfront MIP at the time of closing, or it can be rolled into the loan for the duration of the loan. EX: $100,000 loan amount X 1.75%= $1,750.
Exception: On loans with a Loan to Value of less than or equal to 78% for 15 years term.
Annual MIP, which is paid monthly, with the payments ranging from 0.45% to 1.05% of the base loan amount. The percentage is based on the Terms of the loan: length, and the original loan to value (difference between the purchase price and the borrowed loan amount) EX: $100,000 loan amount X 0.85%=$850 per year/12 months=$70/mo
MIP payments are Tax deductible and are deposited into an Escrow account held in trust by the servicer of the loan. In case of default, the funds will go toward the mortgage repayment
How Long I will be obligated to pay MIP?
| How Long You Will Pay the Annual Mortgage Insurance Premium (MIP) | ||
|---|---|---|
| TERM | LTV% | HOW LONG YOU PAY THE ANNUAL MIP |
| ≤ 15 years | ≤ 78% | 11 years |
| ≤ 15 years | 78.01% to 90% | 11 years |
| ≤ 15 years | > 90% | Loan term |
| > 15 years | ≤ 90% | 11 years |
| > 15 years | > 90% | Loan term |
When should I Stop Paying my FHA Mortgage Insurance Premium?
FHA mortgage insurance lasts for the life of the loan or for 11 years.
Own at least 20% equity in the home or to refinance the mortgage with a non-FHA loan.
