Mortgage insurance premium (MIP) is charged to people who have taken out an FHA loan. It is charged both as an upfront fee at closing of 1.75 percent of the price of the home and as an annual fee of 0.85 percent of the loan amount.
How to stop paying MIP?
The annual fee is typically added to the mortgage payment. The only way to stop paying MIP is to refinance your FHA loan to a conventional loan. MIP is also charged to people who have taken out a reverse mortgage.
Up front fee
In this case, MIP is an upfront fee based on how much you withdraw in the first year of the reverse mortgage. If you withdraw less than 60 percent of your available funds the first year, you’ll be charged an MIP of 0.50 percent.
Don’t get it confused
If you withdraw more than 60 percent of your available funds, you will pay a 2.5 percent MIP. Don’t confuse MIP with PMI. PMI stand for private mortgage insurance. This is charged to people who take out a conventional loan and put down less than 20 percent for a down payment.