FHA MIP vs Conventional PMI Removal Rules
Conventional PMI can be cancelled at 80% of original value on request and ends automatically at 78% under the Homeowners Protection Act. FHA mortgage insurance premium has no such thresholds: for most loans originated after June 2013, MIP lasts 11 years with at least 10% down or the life of the loan with less down. Refinancing from FHA to conventional is the standard way to remove MIP early.
Borrowers often assume mortgage insurance works the same everywhere. It does not. Conventional private mortgage insurance and FHA mortgage insurance premium are different products, governed by different laws, with very different exits. Choosing wrong at purchase can cost you years of unnecessary premiums.
Conventional PMI: equity-based exits
Conventional PMI exists to protect the lender when the down payment is under 20%, and federal law makes it temporary. Under the Homeowners Protection Act of 1998, you can request cancellation at 80% of the original home value, and the servicer must terminate automatically at 78% if you are current. Appreciation can accelerate the exit through a new appraisal showing 80% current loan-to-value. The insurance is provided by a private company, the cost is typically 0.3% to 1.5% of the loan per year, and it can be cancelled. That cancellability is the whole point.
FHA MIP: time-based, not equity-based
FHA mortgage insurance premium works on a clock, not on equity. For most FHA loans with case numbers assigned on or after June 3, 2013, the annual MIP lasts 11 years if your original down payment was at least 10%, or the entire life of the loan if you put down less. Building equity to 50% does not end it. Paying down to 80% loan-to-value does not end it. The premium simply runs its term. FHA also charges an upfront MIP, usually 1.75% of the loan, which is typically financed into the balance. Older FHA loans originated before the 2013 rule change could cancel MIP at 78%, but that rule is long gone for new loans.
Side-by-side comparison
The practical differences: conventional PMI ends through equity thresholds you can accelerate with extra payments or appreciation; FHA MIP ends through time or not at all. Conventional PMI has no upfront premium; FHA charges 1.75% upfront. Conventional cancellation is a borrower right at 80%; FHA offers no equivalent. This is why the refinance path matters so much for FHA borrowers: moving to a conventional loan at 80% loan-to-value or below is the standard escape from MIP, and it is the only early exit available.
The FHA-to-conventional refinance
The refinance math is usually compelling. Suppose you bought with an FHA loan at 3.5% down and the home has appreciated to give you 25% equity. Refinancing into a conventional loan at a competitive rate eliminates the annual MIP entirely, which is often $150 to $250 per month, and there is no new PMI because the new loan is under 80% loan-to-value. The costs are the refinance closing costs and any rate difference, so compare the monthly MIP savings against those costs over your expected tenure. Many borrowers find the payback period is under two years.
Which loan to choose at purchase
If you can put 10% or more down and qualify conventional, the PMI regime is friendlier than FHA's MIP in almost every case: no upfront premium, cancellable at 80%, automatic end at 78%. FHA's advantages are lower down payments, more forgiving credit requirements, and assumability. Borrowers who expect rapid appreciation or who plan to refinance within a few years may rationally choose FHA for access and exit later. Borrowers who will hold the loan long-term with slow equity growth should prefer conventional whenever they qualify.
Watch the loan type on your statement
Some borrowers do not know which insurance they have. Check your monthly statement or origination documents: conventional PMI appears as PMI, while FHA shows MIP and often a larger upfront premium financed into the loan. VA loans have a funding fee but no monthly insurance, and USDA has an annual fee with its own rules. Identifying your regime is step one, because the removal playbook follows from it.
The 2013 rule change that trapped borrowers
Today's FHA rules date to a mortgagee letter effective for case numbers assigned on or after June 3, 2013. Before that change, FHA borrowers could cancel annual MIP at 78% loan-to-value, much like conventional PMI. The change was a financial rescue for the FHA insurance fund after crisis-era losses, and it permanently altered the product: MIP became time-based rather than equity-based. Borrowers with pre-June-2013 FHA loans may still hold the old cancellation rights, a valuable and increasingly rare position worth verifying before refinancing away. Everyone else lives under the 11-year and life-of-loan terms, which is why the refinance exit dominates FHA strategy discussions.
VA and USDA loans for comparison
Two other government programs handle mortgage insurance differently, and the comparison sharpens the choice. VA loans charge an upfront funding fee, which can be financed, but no monthly mortgage insurance at all, making them the cheapest insurance regime for eligible veterans. USDA loans charge an upfront guarantee fee plus a modest annual fee, currently 0.35% of the balance, for the life of the loan while the loan remains, with no cancellation right either. Ranked by insurance cost and flexibility for a long-term holder: VA first, conventional second, USDA third, FHA last. Program eligibility decides, but the ranking informs the strategy within each.
Streamline refinances: the FHA-to-FHA trap
Struggling FHA borrowers are often pitched the FHA streamline refinance: low documentation, no appraisal, quick closing. The trap is that a streamline keeps you in the FHA system, which means the MIP clock keeps running under the same life-of-loan or 11-year terms. For borrowers whose goal is escaping mortgage insurance, the streamline is motion without progress. The product that actually ends MIP is the conventional refinance, which requires the appraisal, the income documentation, and the qualifying credit, precisely the friction the streamline avoids. Do not let an easy refinance substitute for the right one.
Data current as of October 2026. PMI rules follow the Homeowners Protection Act of 1998 and CFPB guidance; FHA rules follow HUD. Confirm your loan's terms with your servicer.