FHA loans win the comparison on day one — lower rate, lower credit requirement, 3.5% down. The comparison changes around year seven, when a conventional borrower’s mortgage insurance disappears and an FHA borrower’s does not.
You’ll learn how each type of mortgage insurance is priced, exactly when conventional PMI can be cancelled, why FHA MIP usually cannot be, and how to decide which costs less for your situation.
Two Different Products With Similar Names
Private mortgage insurance (PMI) applies to conventional loans with less than 20% down. It is issued by private insurers, priced by credit score and loan-to-value ratio, and it is cancellable.
FHA mortgage insurance (MIP) is issued by the government and has two parts: an upfront premium of 1.75% of the loan amount, typically financed into the balance, and an annual premium collected monthly. It is not priced by credit score — and on most current FHA loans it lasts for the life of the loan.
| Conventional PMI | FHA MIP | |
|---|---|---|
| Priced by credit score | Yes — heavily | No |
| Upfront premium | None typically | 1.75% of loan amount |
| Cancellable | Yes | Usually not, when down payment is under 10% |
| Automatic termination | At 78% LTV by original schedule | None on most current loans |
| Minimum credit score | Typically 620, priced worse below 700 | 580 for 3.5% down |
How to Cancel Conventional PMI
There are three routes, and they are not equally useful.
Automatic termination. The servicer must drop PMI when the loan balance reaches 78% of the original value, based on the original amortization schedule. This requires nothing from you — but it ignores any appreciation, so it is the slowest path.
Borrower-requested cancellation at 80%. You can request cancellation once the balance reaches 80% of original value. You must ask; servicers do not volunteer it, and a good payment history is required.
Cancellation based on current value. The one most borrowers miss. If the home has appreciated, you can request cancellation based on a new appraisal rather than the original price. Servicers typically require the loan to be at least two years old, and five years for some scenarios, but in a rising market this can remove PMI years earlier. You pay for the appraisal — often a few hundred dollars against a saving of $150 or more a month. Use our amortization calculator to find the month your balance crosses 80%.
Why FHA MIP Usually Cannot Be Cancelled
On FHA loans with a down payment under 10%, annual MIP runs for the full loan term. Paying the balance down does not end it. Appreciation does not end it. There are only two ways out: refinance into a conventional loan once you have 20% equity, or sell.
With a down payment of 10% or more, MIP terminates after 11 years — which is a real distinction, though a borrower able to put 10% down should usually be comparing against conventional in the first place.
The refinance path is the one to plan for from the start. It works, but it is not free: you pay closing costs again and you accept whatever rate exists at that time. A borrower who bought expecting to refinance out of MIP in three years, and then found rates higher, is stuck paying it. Test the numbers with our refinance calculator before assuming the exit is easy.
Which One Actually Costs Less
There is no universal answer, but the decision reduces to two questions.
What is your credit score? Below roughly 680, PMI is priced badly and conventional add-ons compound the problem, so FHA frequently wins on total cost even accounting for permanent MIP. Above 720, PMI is cheap enough and cancellable, so conventional usually wins. Between the two, it is genuinely close and worth modelling both. Our analysis of what each credit bracket costs shows where the crossover sits.
How long will you hold the loan? Under five years, the FHA advantage on rate and upfront cost usually dominates and permanent MIP never has time to matter. Over ten years, cancellable PMI is worth more than the early savings. On July 23, 2026, FHA loans averaged 6.41% against 6.68% for conforming — a real day-one advantage that the insurance structure gradually erases. Check the current gap on our daily rates page.
The bottom line
- Conventional PMI is cancellable and priced by credit score; FHA MIP is not priced by score and usually lasts the loan’s life.
- FHA charges 1.75% upfront, typically financed into the balance.
- PMI terminates automatically at 78% LTV, can be requested at 80%, and can be cancelled earlier using a new appraisal after roughly two years.
- FHA MIP ends after 11 years only if the down payment was 10% or more; otherwise the exit is a refinance or a sale.
- Below about 680 FHA often costs less all-in; above 720 conventional usually does. Holding period is the tiebreaker.
Frequently Asked Questions
Can I remove FHA mortgage insurance?
On most FHA loans with less than 10% down, annual MIP lasts the full loan term. The practical exits are refinancing into a conventional loan once you have 20% equity, or selling.
When does PMI automatically fall off a conventional loan?
Servicers must terminate it when the balance reaches 78% of the original value based on the original amortization schedule. You can request cancellation earlier at 80%.
Can I cancel PMI early if my home has gone up in value?
Usually yes. Servicers generally allow cancellation based on a new appraisal after the loan is a couple of years old. You pay for the appraisal, but the monthly saving often recovers it quickly.
Is FHA or conventional cheaper with a 660 credit score?
FHA often costs less all-in at that score, because private mortgage insurance and conventional pricing both worsen below about 680 while FHA premiums are not credit-priced. The trade-off is that FHA insurance is usually permanent.
Sources & further reading:
U.S. Department of Housing and Urban Development,
Consumer Financial Protection Bureau.
