Mortgage Insurance: Conventional PMI and FHA MIP
Understand whom mortgage insurance protects, why it is charged, how conventional PMI differs from FHA premiums, and when cancellation may be possible.
Checked against official sources on 2026-07-15
Conventional PMI can make a lower down payment possible
PMI covers part of the lender's loss if the borrower defaults. It can be borrower-paid monthly, paid through other structures, or reflected in lender pricing. Compare the complete payment and upfront cost. A loan advertised as having no monthly PMI may use a higher rate or another cost instead.
Cancellation rights depend on the loan
For many covered conventional mortgages on a principal residence, federal law allows the borrower to request PMI cancellation when the scheduled principal balance reaches 80% of the home's original value, subject to requirements; automatic termination can occur later. FHA, VA, lender-paid insurance, and other loans follow different rules.
FHA mortgage insurance is not conventional PMI
FHA collects upfront and annual mortgage-insurance premiums. How long annual premiums remain depends on the loan's terms, original loan-to-value, and applicable FHA rules. Do not assume FHA insurance will cancel at 20% equity. Ask for the exact premium schedule and compare it with conventional alternatives.
Compare insurance cost over your likely holding period
A lower rate with longer-lasting insurance can cost more or less than a higher rate with cancelable PMI depending on the file and timeline. Compare cash to close, monthly payment, five-year borrowing cost, and the rules for ending insurance. Do not rely on a payment quote that omits insurance.
Common questions
- Does PMI protect me if I cannot make payments?
- No. PMI protects the lender. The borrower can still face late fees, credit damage, and foreclosure.
- Does mortgage insurance always disappear at 20% equity?
- No. Many conventional loans have cancellation or termination rights, but FHA and other structures follow different rules. Check the exact loan documents and current program guidance.
Education, not a loan decision
This guide is general education. It is not a personalized rate quote, approval, legal opinion, tax advice, or lending recommendation. Confirm current program terms and your own eligibility with licensed professionals. You may use any lender.