Ongoing FHA mortgage-insurance charge assessed at an annual rate and normally collected in monthly installments.
Annual mortgage insurance premium, or annual MIP, is the ongoing FHA mortgage-insurance charge assessed using an annual premium rate and normally collected in monthly installments.
The word “annual” describes how the premium rate and annual charge are determined, not how the borrower usually pays it. The servicer generally collects one-twelfth of the applicable annual amount with each monthly mortgage payment.
Annual MIP can materially affect qualification and long-term affordability. It belongs in the full payment comparison alongside principal, interest, property taxes, and homeowners insurance.
Annual MIP appears when an FHA lender prepares payment estimates and the Loan Estimate. Borrowers see the monthly collection in the projected Mortgage Insurance amount, not as a once-a-year household bill.
After closing, the servicer collects monthly installments and adjusts the amount according to the FHA premium calculation and scheduled balance. The charge continues for the loan’s required MIP duration.
A simplified first-year estimate is:
estimated monthly MIP = applicable mortgage balance x annual MIP rate / 12
For example, if an illustrative annual MIP rate is 0.55% on a $300,000 applicable balance:
| Step | Illustrative amount |
|---|---|
| Annual MIP estimate | $300,000 x 0.55% = $1,650 |
| Monthly installment | $1,650 / 12 = $137.50 |
The actual FHA calculation can use program-specific balance and rounding rules, and the amount can decline as the scheduled balance declines. The official loan disclosures and servicing records control.
FHA rules can use several loan facts:
| Factor | Why it matters |
|---|---|
| FHA case-number assignment date | Identifies which version of the rules applies |
| Original LTV | Can affect premium rate and assessment duration |
| Mortgage term | Different term bands can use different treatment |
| Base loan amount | Used in program premium calculations |
| Scheduled balance | Ongoing premium can be calculated from the declining balance |
For many newer FHA forward mortgages, original LTV at or below 90% generally produces an 11-year annual-MIP period, while original LTV above 90% generally produces MIP for the mortgage term. Older cases may have different cancellation rules, so the borrower should verify the specific loan rather than rely on a generic equity threshold.
Annual MIP differs from Upfront Mortgage Insurance Premium (UFMIP) because UFMIP is charged once at closing, while annual MIP is ongoing and usually collected monthly.
It differs from Monthly Mortgage Insurance because annual MIP is specifically an FHA charge. “Monthly mortgage insurance” is a broader collection-frequency term and commonly describes conventional monthly PMI.
It also differs from PITI. PITI is shorthand for principal, interest, taxes, and insurance; annual MIP is a separate mortgage-insurance cost that may be included when the total payment is quoted.
An FHA buyer sees $138 in the monthly mortgage-insurance row and assumes the policy costs $138 total. In fact, that amount is one monthly installment of the annual MIP. The borrower must multiply the recurring impact across the expected MIP period when comparing FHA with a conventional loan.