FHA Mortgage Insurance Premium (MIP) Calculator
Use this calculator to estimate the Upfront Mortgage Insurance Premium (UFMIP) and the ongoing Annual Mortgage Insurance Premium (MIP) for an FHA-insured loan. These premiums are specific to FHA loans and are crucial components of their overall cost.
Calculation Results:
Calculated Upfront MIP:
Calculated Annual MIP Rate:
Estimated Monthly MIP:
MIP Duration:
Understanding FHA Mortgage Insurance Premiums (MIP)
FHA loans, insured by the Federal Housing Administration, are a popular option for homebuyers, especially those with lower credit scores or smaller down payments. A key characteristic of FHA loans is the requirement for Mortgage Insurance Premiums (MIP), which protect the lender in case the borrower defaults on the loan.
Upfront Mortgage Insurance Premium (UFMIP)
The Upfront Mortgage Insurance Premium (UFMIP) is a one-time fee paid at closing or financed into the loan amount. As of the current guidelines, the UFMIP is typically 1.75% of the base loan value. This premium is mandatory for all FHA loans and contributes to the overall cost of the loan.
For example, on a $300,000 FHA loan, the UFMIP would be $300,000 * 0.0175 = $5,250. This amount is either paid out-of-pocket at closing or added to your loan balance, increasing the total amount you finance.
Annual Mortgage Insurance Premium (Annual MIP)
In addition to the UFMIP, FHA loans also require an Annual Mortgage Insurance Premium. Despite its name, this premium is paid monthly as part of your mortgage payment. The annual MIP rate varies based on two primary factors:
- Loan Term: Whether your loan is for 15 years or 30 years.
- Loan-to-Value (LTV) Ratio: This is determined by your initial equity percentage (down payment). A lower down payment results in a higher LTV.
The rates are typically:
- For 30-year loans (or >15 years):
- Initial Equity less than 10% (LTV > 90%): 0.55% annually
- Initial Equity 10% or more (LTV ≤ 90%): 0.50% annually
- For 15-year loans (or ≤15 years):
- Initial Equity less than 10% (LTV > 90%): 0.45% annually
- Initial Equity 10% or more (LTV ≤ 90%): 0.45% annually
The annual MIP is calculated on the outstanding loan balance each year. For initial estimates, it's often calculated on the original base loan value. For instance, a $300,000 30-year FHA loan with a 3.5% down payment would have an annual MIP rate of 0.55%. This translates to an annual premium of $300,000 * 0.0055 = $1,650, or $137.50 per month.
MIP Duration
The duration for which you pay the annual MIP is also determined by your initial equity percentage:
- If your initial equity (down payment) is less than 10%, you will pay the annual MIP for the entire life of the loan.
- If your initial equity (down payment) is 10% or more, you will pay the annual MIP for 11 years.
This means that making a larger down payment not only reduces your loan amount but can also significantly reduce the total amount you pay in mortgage insurance over the life of the loan.
Example Scenarios:
Scenario 1: Minimum Down Payment
- Base Loan Value: $300,000
- Initial Equity Percentage: 3.5%
- Loan Term: 30 Years
- Calculated UFMIP: $5,250 ($300,000 * 1.75%)
- Annual MIP Rate: 0.55% (30-year, <10% equity)
- Estimated Monthly MIP: $137.50 ($300,000 * 0.55% / 12)
- MIP Duration: Life of Loan
Scenario 2: Larger Down Payment, Shorter Term
- Base Loan Value: $250,000
- Initial Equity Percentage: 10%
- Loan Term: 15 Years
- Calculated UFMIP: $4,375 ($250,000 * 1.75%)
- Annual MIP Rate: 0.45% (15-year, ≥10% equity)
- Estimated Monthly MIP: $93.75 ($250,000 * 0.45% / 12)
- MIP Duration: 11 Years
Understanding these premiums is essential for any borrower considering an FHA loan, as they add to the overall cost of homeownership.