PMI vs. MIP: What’s the Difference?

When you shop for a mortgage, you may see PMI (Private Mortgage Insurance) and MIP (Mortgage Insurance Premium). Both protect lenders if a borrower defaults. They also let buyers purchase homes with smaller down payments. But the two are not the same.

What Is PMI?

Private Mortgage Insurance (PMI) applies to conventional loans when you put down less than 20%.

• When it applies: Down payment under 20% on a conventional loan.
• How you pay: Added to your monthly payment, or sometimes paid upfront.
• When it ends: You can request removal at 20% equity. At 22% equity, it usually drops off automatically if payments are current.

Learn more about conventional loans with ALCOVA.

What Is MIP?

Mortgage Insurance Premium (MIP) applies to FHA loans. Unlike PMI, it’s required for every FHA loan, no matter the down payment.

• When it applies: Always with FHA financing.
• How you pay: One upfront premium (often rolled into the loan) plus an annual premium paid monthly.
• When it ends: If you put down 10% or more, MIP lasts 11 years. With less than 10%, it often lasts for the life of the loan. Refinancing into a conventional loan can remove it.

Explore your options with FHA loans from ALCOVA.

Key Differences Between PMI and MIP

Here’s how they compare:

• Loan type: PMI is for conventional loans. MIP is for FHA loans.
• Down payment: PMI applies only with less than 20% down. MIP applies no matter the amount.
• Cost structure: PMI is often monthly only. MIP requires both upfront and monthly costs.
• Cancellation: PMI ends once you build equity. MIP may last longer, even for the full term.

Which One Fits You?

Your choice depends on your financial profile:

• Strong credit and larger savings: A conventional loan with PMI may cost less overall.
• Lower credit or limited savings: An FHA loan with MIP may help you qualify more easily.
• Planning to refinance later: FHA may be a good starting point. You can refinance to a conventional loan to remove MIP.

How ALCOVA Can Help

Mortgage insurance rules can feel confusing. At ALCOVA, we break it down clearly. Our team can help you:

• Estimate your monthly payment with PMI or MIP
• Calculate how long you’ll pay for mortgage insurance
• Compare FHA and conventional options for your budget

Final Thoughts

Both PMI and MIP open doors to homeownership with smaller down payments. But they work differently. The right choice depends on your credit, savings, and goals.

Talk to an ALCOVA loan officer today. We’ll guide you to the option that fits your plans and helps you buy with confidence.