FAQs
What is the difference between PMI and MIP?
Both PMI (Private Mortgage Insurance) and MIP (Mortgage Insurance Premium) are types of mortgage insurance. They serve the exact same purpose: protecting the lender in case you fall behind on your mortgage payments.
The primary difference is the type of loan they are attached to:
PMI (Private Mortgage Insurance)
- Loan Type: Conventional Loans.
- When is it required? When your down payment is less than 20%.
- How is it paid? Typically paid as a single ongoing monthly fee added to your mortgage payment.
- How long does it last? It automatically cancels when you reach 22% equity in your home (or you can formally request cancellation when you reach 20% equity).
MIP (Mortgage Insurance Premium)
- Loan Type: FHA Loans (Government-backed).
- When is it required? On almost all FHA loans, regardless of your down payment size.
- How is it paid? It is paid in two parts: an Upfront Mortgage Insurance Premium (UFMIP) plus an ongoing monthly fee.
- How long does it last? It typically lasts for the life of the loan. The only exception is if you made a down payment of 10% or more, in which case it lasts for 11 years.
A closer look at FHA MIP Payments:
If you have an FHA loan, the Upfront Mortgage Insurance Premium (UFMIP) is a one-time fee paid at closing, though it can often be rolled into your total loan amount. The monthly MIP is the ongoing fee that gets included in your regular monthly mortgage payment.