PMI and MIP get used almost interchangeably, and both are "mortgage insurance" you pay when your down payment is small. But they behave very differently — and the biggest difference, whether the cost ever goes away, can swing thousands of dollars over the life of a loan.
Mortgage insurance basics
Mortgage insurance exists because a small down payment is riskier for the lender. To offset that risk, you pay for insurance that pays the lender if you stop making payments. That's the part worth sitting with: it protects the lender, not you — even though you're the one paying for it. Conventional loans use PMI; FHA loans use MIP.
PMI on conventional loans
On a conventional loan, if you put less than 20% down, you pay private mortgage insurance (PMI) — most commonly as a monthly add-on to your payment. How much depends on your down payment and your credit. The good news is what happens next.
When PMI drops off
PMI is cancellable. Under federal law you can request removal at 80% of the original value, and it ends automatically at 78%. Some loans also allow removal based on a new appraisal after a seasoning period — ask your servicer. So on a conventional loan, PMI is temporary — a cost you shed as you build equity.
MIP on FHA loans
FHA loans carry their own version: the mortgage insurance premium (MIP), in two parts — an upfront premium (often financed into the loan) and an annual premium paid monthly. Everyone with an FHA loan pays it, regardless of down payment.
When MIP is permanent
Here's the crucial difference. On most FHA loans today, the annual MIP lasts the life of the loan — it does not fall away as you build equity the way PMI does. (Put 10% or more down and the annual MIP instead ends after 11 years.) For most FHA borrowers, the only way to truly remove MIP is to refinance out of the FHA loan, typically into a conventional loan once their equity and credit support it.
Cost comparison
There's no universal winner — it depends on your profile. FHA's MIP can be cheaper upfront and comes with easier qualifying, but because it tends to last, it can cost more over the years you hold the loan. Conventional PMI may ask for stronger credit, but you can ask to remove it at 80% of the original value and it ends automatically at 78%. The honest comparison isn't the monthly premium alone — it's the total cost over how long you'll actually keep the loan.
Removing or avoiding mortgage insurance
A few levers:
- Put 20% down on a conventional loan — no PMI at all.
- Pay down to 80% of the original value on a conventional loan — request PMI removal (it ends automatically at 78%).
- For FHA, refinance into a conventional loan once you qualify — that ends the MIP.
- (Historically, an 80/10/10 piggyback was used to dodge PMI with 10% down — see that piece for where it stands today.)
The takeaway
PMI and MIP both protect the lender when you put little down — but PMI cancels as you build equity, while FHA's MIP usually sticks for the life of the loan. If you're weighing the two, compare the total cost over your real time horizon, not just the monthly number — and remember that for FHA, "removing" mortgage insurance usually means refinancing out of it.
PMI cancellation thresholds and FHA MIP duration depend on your loan's term and down payment and change over time. Confirm the current rules for your loan with your lender.