Three programmes, three completely different rules about when the insurance stops — and on one of them, it never does.
Mortgage insurance protects the lender, not you. It is what makes lending at a low down payment possible. The rules on when it ends differ sharply between programmes, and that difference is where the real money is.
Private mortgage insurance is generally required when your down payment is under 20% — that is, loan-to-value above 80%.
The good news is that federal law gives you rights to end it. Under the Homeowners Protection Act:
You can request cancellation on the date your principal balance is scheduled to fall to 80% of the original value. Conditions: request it in writing, be current on payments with a good payment history, certify there are no junior liens, and provide evidence the property value has not fallen below the original value.
Automatic termination happens when your balance is scheduled to reach 78% of the original value, provided you are current. The servicer must do this without you asking.
Final backstop: PMI must end the month after you reach the midpoint of the amortisation schedule — after 15 years on a 30-year loan — regardless of loan-to-value.
One definition does a lot of work: "original value" is the lesser of the sale price or the original appraised value, not the current market value. Rising prices do not automatically get you there. If your home has appreciated substantially, ask your servicer about cancellation based on a new appraisal — that is a separate route with its own rules.
FHA charges two premiums.
Upfront MIP: 1.75% of the base loan amount, usually financed into the loan.
Annual MIP, for terms over 15 years:
| Base loan amount | LTV | Annual MIP | Duration |
|---|---|---|---|
| ≤ $726,200 | ≤ 90% | 0.50% | 11 years |
| ≤ $726,200 | 90.01% – 95% | 0.50% | Life of loan |
| ≤ $726,200 | over 95% | 0.55% | Life of loan |
| > $726,200 | ≤ 90% | 0.70% | 11 years |
| > $726,200 | 90.01% – 95% | 0.70% | Life of loan |
| > $726,200 | over 95% | 0.75% | Life of loan |
Here is the point that matters most:
An FHA borrower putting 3.5% down — the standard minimum — is at 96.5% LTV, and pays annual MIP for the life of the loan. It does not cancel at 80%. It does not cancel at 78%. The only way out is to refinance out of FHA entirely.
At 10% down or more, MIP drops off after 11 years.
That is the sharpest practical difference between FHA and conventional lending, and it is rarely explained at the point of sale. On a $300,000 loan, 0.55% is roughly $1,650 a year, indefinitely.
VA loans carry no monthly mortgage insurance, at any loan-to-value, including 100% financing.
Instead there is a one-time funding fee, financeable into the loan, of 1.25% to 3.3% depending on down payment and whether it is a first or subsequent use. Substantial categories of borrower are exempt entirely — most notably anyone receiving VA compensation for a service-connected disability.
For an eligible borrower, this is usually decisive. A funding fee paid once against MIP paid monthly forever is not a close comparison.
| Conventional 97 | FHA | VA | |
|---|---|---|---|
| Upfront charge | None typically | 1.75% financed | 2.15% funding fee (first use), financeable, often exempt |
| Monthly insurance | PMI, cancellable at 80% | MIP for the life of the loan | None |
| Minimum down | 3% (HomeReady / Home Possible) | 3.5% | 0% |
The FHA route is more forgiving on credit. The conventional route lets you stop paying insurance. The VA route, if you are eligible, beats both.