Comparing Home Loan Mortgage Insurance Requirements
June 30, 2025
Some borrowers will pay mortgage insurance until they reach 20% equity in the home. Others will pay it for the duration of the loan until the mortgage is paid off or refinanced. Which option is right for you? How and for how long you pay mortgage insurance depends greatly on the home loan you choose.
VA Home Loan Mortgage Insurance
Unlike FHA loans, which are also government-backed mortgages, the VA home loan program has no VA-required mortgage insurance. Borrowers who qualify for VA loans find this to be a definite advantage. But VA loans aren't offered to the general public, only those with qualifying uniformed service.
Conventional Loan Mortgage Insurance
If you put less than 20% down on a conventional loan, lenders usually require Private Mortgage Insurance (PMI), which protects the lender if the borrower defaults on the loan. You pay this insurance monthly with your mortgage payment and this payment typically comes out of escrow.
The key benefit of PMI is that you can cancel it once you reach enough equity in the home. How much equity is required?
Once you owe 80% or less of your home's value (meaning you have 20% equity), you can usually ask to remove PMI. Don’t assume it’s automatically removed once you hit 20% equity.
If your payments are on time, lenders may be required to cancel PMI once you owe 78% of the original price or appraised value.
This means that as you gain equity, you can eliminate this extra monthly cost, saving money over the life of the loan. Be sure to ask about PMI cancellation when discussing the fine print of a conventional home loan and know what the lender's requirements are to cancel it, as it may not be automatic.
FHA Loan Mortgage Insurance
FHA loans come with two types of mortgage insurance charges. The first is the Upfront Mortgage Insurance Premium (UFMIP), which is paid at closing time.
There's also an Annual Mortgage Insurance Premium (MIP), part of your monthly mortgage obligation on the FHA loan. This MIP is an annual fee, a percentage of your loan balance, paid monthly. If your initial down payment was less than 10%, the MIP generally stays on the loan for its whole term.
If your initial down payment was 10% or more, you can cancel the MIP after 11 years. This ongoing cost can make an FHA loan more expensive, even with a good interest rate.
Cancellation of FHA home loan MIP is not automatic. You may need to apply for this option. You can also “cancel” MIP on your FHA mortgage by refinancing into a non-VA mortgage if the lender allows you to do so without adding private mortgage insurance.
UFMIP is a one-time charge, currently 1.75% of the loan amount, usually added to your loan.
You may wish to consider refinancing to end mortgage insurance, but it pays to compare the closing costs and other expenses to see how much you’ll be saving (or not saving) with a new mortgage.
Talk to a participating lender about your options to buy, refinance, renovate, or remodel a home.
FHA Loan Articles
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