PMI vs MIP: What’s the Difference Between Mortgage Insurance Types?
If you’re shopping for a mortgage, you’ll encounter two types of mortgage insurance: PMI (Private Mortgage Insurance) and MIP (Mortgage Insurance Premium). Understanding the differences helps you choose the right loan product.
What Is PMI?
PMI applies to conventional loans — those not backed by the government. It’s arranged through private insurance companies. PMI is only required when your down payment is less than 20%.
What Is MIP?
MIP is required on FHA loans, which are backed by the Federal Housing Administration. Unlike PMI, MIP is required regardless of down payment size and includes both an upfront premium and an annual premium.
Key Differences at a Glance
| Feature | PMI | MIP (FHA) |
|---|---|---|
| Loan Type | Conventional | FHA |
| When Required | LTV above 80% | Always |
| Upfront Premium | Usually none | 1.75% of loan |
| Annual Rate | 0.20%–1.50% | 0.45%–1.05% |
| Cancellable? | Yes, at 80% LTV | Only if 10%+ down (11 years) |
Which Is Better?
For buyers with good credit and a stable income, conventional loans with PMI often cost less in the long run because PMI can be cancelled. FHA loans with MIP may be better for buyers with lower credit scores who can’t qualify for conventional loans.
Conclusion
Both PMI and MIP serve the same purpose but work differently. Compare total long-term costs before choosing between conventional and FHA loan options.
