They are both mortgage insurance, they both come off your payment eventually — except one of them usually does not.
Short version: conventional PMI cancels at 80% and terminates at 78%. On most FHA loans written since June 2013, MIP lasts the life of the loan and only a refinance removes it. On the same house with the same deposit, that difference is worth about $22,600.
The rules are easy to state and hard to feel. Putting a number on them helps.
A $320,000 house, 5% down either way, 6.5% over thirty years. The only thing that changes is which mortgage insurance you are carrying.
| FHA | Conventional | |
|---|---|---|
| Loan amount | $309,320 | $304,000 |
| Upfront premium | $5,320 | None |
| Annual rate | 0.55% | 0.55% |
| How long it runs | Life of the loan | 124 months |
| Total insurance paid | $38,703 | $16,065 |
Same premium rate, same house, same deposit. The FHA borrower pays $22,637 more — not because the rate is worse, but because the conventional premium stops after ten years and the FHA one never does.
Notice also the first row. The upfront premium is financed, so the FHA borrower starts with a larger loan than the conventional borrower despite putting the same money down, and pays interest on that difference for thirty years.
One thing this table does not show, and it matters: FHA loans often price at a lower interest rate and accept credit profiles conventional lenders decline. For a buyer who cannot get a conventional approval at all, the comparison above is academic — the real alternative is not buying. The point is not that FHA is a bad product. It is that its insurance is expensive, and if you have the option of both, that cost belongs in the decision.
| Conventional PMI | FHA MIP | |
|---|---|---|
| Cancellable by request | Yes, at 80% LTV | Usually no |
| Automatic termination | Yes, at 78% LTV | Only with 10%+ down |
| Upfront premium | None | 1.75% of the loan |
| Based on current value | Possible via appraisal | No |
| Way out | Equity | Refinance |
For FHA loans closed on or after June 3, 2013, the annual mortgage insurance premium runs for the life of the loan if the down payment was less than 10%. With 10% or more down, it drops after 11 years.
Since the great majority of FHA borrowers put down the minimum 3.5%, most FHA mortgage insurance is permanent. Paying the balance down does nothing. Getting an appraisal does nothing. The only exit is a new loan.
Whether that exit is worth taking is a separate question, and the answer is less obvious than the size of the premium suggests — worked through in FHA to conventional: does escaping MIP pay?
Loans that closed before that date follow older rules that did allow cancellation. If your FHA loan is from 2012 or earlier, ask your servicer where you stand — the answer may be different from what you assume.
Buried in that rule is the single most valuable number in FHA lending, and it is almost never presented as a decision.
Below 10% down, the premium is permanent. At 10% or more, it ends after eleven years. There is no gradient — it is a cliff, and crossing it is worth more than most people would guess.
| Deposit on a $320,000 house | 3.5% — $11,200 | 10% — $32,000 |
|---|---|---|
| Loan amount | $314,204 | $293,040 |
| Premium runs for | 30 years | 11 years |
| Upfront premium | $5,404 | $5,040 |
| Monthly premiums paid | $33,910 | $16,383 |
| Total insurance | $39,314 | $21,423 |
An extra $20,800 of deposit removes $17,891 of insurance. Close to a dollar back for every dollar in, and that is before counting the interest you avoid on a loan that is $21,000 smaller.
Which makes this the question to settle before you choose a loan type, not after. If you are somewhere between 3.5% and 10% and could reach 10% by waiting a few months or asking for help with the deposit, the eleven-year cutoff is worth reaching for. If you are at 15% and considering FHA anyway, the comparison in the table above the fold applies and conventional is likely cheaper.
Nothing about this can be fixed later. The rule is set by the deposit at closing, and no amount of equity built afterwards moves it.
Refinancing an FHA loan into a conventional one removes MIP permanently, and if you have 20% equity it adds no PMI in its place. Whether that is worth doing turns on the rate.
VA loans carry no monthly mortgage insurance at all — only a one-time funding fee at closing, which is waived for many disabled veterans. USDA loans carry an annual fee that, like FHA, generally runs the life of the loan.
See your own dates
Enter your loan and get all four cancellation routes with the date you qualify for each.
It is not always obvious from a statement. Look for a case number or the letters FHA in your closing documents, or simply call your servicer and ask. The answer determines whether any of the cancellation strategies apply to you at all, so it is worth confirming rather than assuming.
Two clues on the statement itself. An FHA loan shows mortgage insurance from the first payment and keeps showing it year after year with no end date anywhere in your paperwork. A conventional loan's premium is tied to a cancellation schedule your servicer is required to give you at closing — if you have a document telling you the date the premium ends, it is conventional.
Reduced to the decisions that actually change the number:
And if you have not committed to a purchase date at all, there is a larger version of this question — whether to buy now with insurance or wait until you have 20% and none. That is in is it worth waiting to avoid PMI.