Answering the Core Question
On an FHA loan, you are required to pay mortgage insurance premiums (MIP) for the life of the loan if you put down 10% or less. If your down payment is 10% or higher, MIP is required only for 5 years. After that, you can cancel the insurance and no longer pay the premium.
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What is FHA Mortgage Insurance?
Mortgage insurance protects the lender if the borrower defaults. For FHA loans, it is split into an upfront premium (UFMIP) and a monthly premium (MIP). The upfront premium is paid at closing, while the monthly premium is included in your monthly payment.
How Long Does MIP Last?
There are two scenarios:
- 10% or less down payment: MIP is required for the entire term of the loan, typically 30 years.
- 10% to 20% down payment: MIP is required for 5 years, after which you can apply to cancel it.
Cancelling MIP After 5 Years
If you paid at least 10% down, you can request cancellation after 5 years. The lender will verify that your loan balance is below 80% of the original loan amount and that you have a good payment history.
Key Table: MIP Duration by Down Payment
| Down Payment | MIP Duration | Cancellation Eligibility |
|---|---|---|
| 0–9.9% | Lifetime | No |
| 10–19.9% | 5 years | Yes, after 5 years |
| ≥20% | None | Not applicable |
Practical Considerations
• Monthly cost impact: MIP can add 0.5%–1% of the loan amount to your payment.
• Refinancing: If you refinance into a conventional loan, you can remove FHA MIP entirely.
• Early payoff: Paying off the loan early still leaves you with MIP if you have the 10% down scenario.
Conclusion
In summary, FHA mortgage insurance is not a lifetime expense if you put down at least 10%. After five years, you can cancel it, saving money. With a smaller down payment, the insurance stays for the full loan term, so plan accordingly.