Mortgage Insurance Premium (MIP)

What Is Mortgage Insurance Premium (MIP)?

Mortgage Insurance Premium (MIP) is the insurance required on FHA loans backed by the Federal Housing Administration.

MIP protects the lender if the borrower defaults.

Unlike PMI, MIP applies specifically to FHA loans.

Why It Matters in a Mortgage

MIP includes:

• Upfront premium at closing
• Annual premium included in monthly payment

MIP increases total borrowing cost but allows:

• Lower down payments
• Flexible credit qualification

For many FHA loans, MIP lasts for the life of the loan unless refinanced.

How It Works

Example:

• Loan Amount: $250,000
• Upfront MIP: 1.75%
• Upfront Cost: $4,375

Annual MIP is calculated as a percentage of the remaining balance.

MIP vs. PMI

MIP → FHA loans
PMI → Conventional loans

Removal rules differ.

FAQs About MIP

Can MIP be removed?
Depends on down payment and loan terms.

Is MIP refundable?
Generally no.

Does MIP protect the homeowner?
No.

Related Terms

FHA Loan
Mortgage Insurance
Private Mortgage Insurance
PITI
Loan-to-Value Ratio

Back to All Financial Terms