How to Plan Mortgage Insurance Premiums on a 15-Year FHA Loan

The Quick Read: Mortgage insurance on this loan has two parts: a one-time upfront premium of 1.75% of the base loan, which is financed, and an annual premium collected monthly. Your down payment sets how long the annual part lasts. At 90% loan-to-value (LTV) or below, it ends after eleven years. Above 90%, it runs the full term. The 15-year term lowers the annual tier but does not remove it. All of this is subject to lender guidelines and full file review.

What Are the Two Parts of FHA Mortgage Insurance?

FHA mortgage insurance is an upfront premium plus an annual premium. Both are required on a standard FHA purchase. They protect the lender if the loan defaults. They do not protect you.

Upfront premium. The upfront premium is 1.75% of the base loan. Most buyers finance it, so it adds to the loan balance. It can also be paid in cash at closing. HUD’s servicing rules state that the LTV ratio is based on the principal balance excluding the upfront premium, per HUD Handbook 4000.1 servicing text. So financing it does not push you into a higher LTV tier.

Annual premium. The annual premium is a percentage of the loan balance, paid in monthly installments and remitted to HUD. On the FHA loan programs Lendmire arranges through wholesale lenders, it falls between 0.15% and 0.75% of the balance. The exact figure depends on term, loan amount and LTV. You can read more about the program on Lendmire’s FHA loan programs page.

Credit score is not one of the inputs. HUD’s annual premium tables key on term, base loan amount and LTV.

How Does a 15-Year Term Change the Annual Premium?

A 15-year term puts you in a lower annual-premium tier than a longer term. It does not exempt you from the premium. HUD’s current annual schedule, Mortgagee Letter 2023-05, has separate tables for loans of 15 years or less and for longer loans.

Within the 15-year table, two things matter:

• LTV at or below 90%. You land in the lowest part of the annual range, and the premium is collected for eleven years.
• LTV above 90%. You pay a higher tier, and it is collected for the mortgage term. On a 15-year loan, that means all fifteen years.

The base loan amount also shifts the tier. HUD sets a base-loan-amount breakpoint tied to FHA loan limits. County loan limits apply and change from year to year. Most 15-year borrowers should ask the loan officer which side of that line the file falls on.

One more point. A shorter term does not shrink your total monthly cost in any simple way. The premium tier gets lighter, but the principal-and-interest payment gets heavier. More on that below.

What Sets How Long You Pay? The 90% Line

Duration is set at origination and follows the amortization term and the original LTV. HUD’s Loan Balance at Final MIP Date tool points to this rule for loans with case numbers assigned on or after June 3, 2013.

That makes the down payment the main planning decision. The program minimum is 3.5% down, which means financing up to 96.5% of the lesser of price or appraised value (at a decision score of 580 or higher, owner-occupied). At that leverage, the annual premium runs for the full 15 years. Terms depend on the lender’s guidelines, the property type, the leverage, and a full review of the credit profile.

Put 10% down, and the LTV is 90%. The premium drops to the lowest tier and ends after eleven years. The exact numbers vary by lender and program and follow a full review of property, leverage, and credit.

Two details trip people up:

1. The LTV driver is the lesser of price or appraised value. HUD’s rules use the lesser of the initial sales price or the appraised value at origination. A low appraisal can move the LTV. So can a price change before closing.

2. A later appraisal does not help. HUD does not consider new appraised values when it tests for cancellation. The same servicing text says the basis is the initial amortization schedule.

How Do You Calculate the Monthly Premium?

The monthly premium is the annual percentage applied to the balance, divided by twelve. You can run it on any file once the lender confirms the tier.

1. Confirm the tier. Ask for the term, base loan amount and LTV the lender used. These three pick the row in the HUD table.

2. Get the annual percentage for that row. The lender provides it. It sits inside the 0.15% to 0.75% range for FHA loans.

3. Apply it to the balance. The premium is a percentage of the balance, not a flat charge.

4. Divide by twelve. That is the monthly installment.

5. Add it to the rest of the housing payment. It sits next to principal and interest, property taxes and homeowners insurance.

6. Test the total against the ratios. The monthly premium counts in your debt-to-income calculation. The base pair is 31/43 (housing to total) with no compensating factors. Documented compensating factors can reach 40/50 at the top tier. The automated finding governs most files.

Because the balance falls as you pay down a 15-year loan, the dollar amount of the premium shrinks each year. A 15-year loan amortizes fast, so the shrinkage is noticeable.

Three Scenarios Side by Side

Think in percentages of price. Here is how the 15-year premium behaves at three leverage points. These are illustrations of the mechanics, not offers.

The middle row is the trap. A buyer who is a point or two short of 10% pays the higher tier for the whole term. Buyers in that spot should check whether seller contributions, gift funds or a small amount of extra cash can reach the 90% line. Seller or interested-party contributions on a purchase reach up to 6% of the price, but they cannot count toward your own required investment. They also do not lower the LTV. The lender will confirm which sources of funds count.

Crossing the 90% line moves two things at once: the tier and the duration. That is why it is the highest-value planning point on a 15-year file.

What the Premium Timeline Looks Like

On a 15-year loan, plan the budget in phases. The eleven-year window ends before the loan does.

The eleven-year cutoff is real, but the premium-free stretch is short. It covers the last four years of a 15-year loan. The savings are worth having, but they are not the main reason to pick a 15-year term. The shorter schedule and faster equity build are.

One more timeline point: the upfront premium is part of the loan balance if you financed it. It earns interest like the rest of the balance. It does not go away when the annual premium ends.

Which Planning Levers Work, and Which Don’t?

Only a few choices change the premium. Many commonly discussed ones do not.

On extra payments: cancellation is tied to the initial amortization schedule, per the HUD FHA Resource Center Q&A on MIP duration. If payments were accelerated or modified, HUD may use the actual amortization the servicer reports. For current loans, extra principal does not by default end the premium early. It still cuts interest and builds equity faster, so it is a fine choice. It just is not a premium strategy.

How Does a 15-Year Compare to a 30-Year for Premiums?

A 15-year loan carries a lighter annual-premium tier and, at 90% LTV or below, the same eleven-year duration as a 30-year loan at 90% LTV or below. The big gap is on the high-leverage side. A 30-year loan above 90% LTV pays the premium for the term. Final terms depend on the lender’s guidelines, the property type, and the borrower’s complete credit picture.

So the premium bill over the life of the loan is smaller on a 15-year loan. The catch is the monthly payment. The shorter amortization pushes principal and interest up, and that drives the debt-to-income math. Compare the total monthly payment, not just the premium line.

Buyers working near the top of their ratios often find the 15-year payment is the constraint. If a file is already close to the 31/43 base pair, the shorter term can push it past. Documented compensating factors can stretch the ratios toward 40/50, but that depends on the file and the automated finding. A 30-year loan with a plan to prepay may fit better. Lendmire’s piece Does a 15-Year FHA Loan Mean Lower Mortgage Insurance? walks through that trade-off.

What Are Your Exit Options?

There are three ways the premium stops: it cancels on schedule, you refinance, or you sell or pay off the loan.

Automatic cancellation. Where it applies, HUD cancels the annual premium automatically. You do not file anything. On a 15-year loan at 90% LTV or below, that happens at the eleven-year mark. Each figure is subject to lender guidelines and a complete review of property type, leverage, and credit.

Refinance. A refinance creates a new case number. The new loan gets a new premium schedule based on its own term and LTV. That is a general result of how HUD’s case-number rules work. If you refinance an FHA loan into another FHA loan, the premium continues in some form. Moving to a different loan type changes the picture. Ask a loan officer to compare before you decide. For a longer look at this question, see Lendmire’s article Should You Use an FHA Loan if You Plan to Exit Mortgage Insurance?.

Sale or payoff. The premium ends when the loan ends. If you expect to move within a few years, the long-term duration matters less than the upfront premium and the first few years of payments.

Older Loans: How Do You Know Which Rules Apply?

The rules depend on the case-number date. HUD changed the cancellation rules several times. Loans with case numbers assigned before June 3, 2013 follow older cohort rules. Some of those 15-year-or-less loans pay no annual premium or cancel at 78% LTV. Leverage, reserves, and pricing vary by lender and program; the final terms follow the full file review.

Those rules do not apply to a new loan. If you read a page saying the premium drops off at 78%, check the date on it. The HUD servicing text lays out the older cohorts. Some special programs, such as Section 247 loans on Hawaiian Home Lands, also carry different premium rules.

Common Mistakes and Myths

• “A 15-year term means no mortgage insurance.” It lowers the annual tier. It does not remove it.
• “The premium drops off at 78%.” That is an older-loan rule. On current loans, duration depends on original LTV.
• “A higher appraisal later will cancel it.” HUD does not use new appraisals for cancellation.
• “Extra payments will end it early.” Cancellation follows the initial schedule.
• “Better credit lowers the premium.” HUD’s tables do not use credit score. Credit still matters for approval and for the decision score floor of 580.
• Planning on payment with premium only. Build a second budget for the phase after the premium ends.

Planning Checklist: What to Ask Your Loan Officer

1. Which tier is my file in, and what term, base loan amount and LTV did you use?

2. How long does the annual premium last on this file?

3. How far am I from 90% LTV, and can my funds get me there?

4. Is the upfront premium financed or paid in cash on my Loan Estimate?

5. What does the total monthly payment look like with the premium, and without it after the cutoff?

6. How do my ratios look against the 31/43 base pair, and does the automated finding allow more? Terms vary by lender guidelines, property type, leverage, credit profile, and full file review.

Check the Loan Estimate and the Closing Disclosure for the premium lines. Then check your first escrow statement to confirm the monthly figure matches.

Key Terms Defined

Upfront premium: a one-time charge of 1.75% of the base loan, usually financed into the balance.

Annual premium: the ongoing insurance charge, a percentage of the balance collected monthly.

LTV (loan-to-value): the loan amount divided by the lesser of price or appraised value, excluding the financed upfront premium.

Base loan amount: the loan before the financed upfront premium is added.

Case number: the HUD number assigned to your loan; its date decides which premium rules apply.

Initial amortization schedule: the payoff schedule set at origination, which HUD uses to test for cancellation.

If you are buying a home and want to see whether an FHA loan fits your file, Lendmire can help you compare the options and what each one asks of the file.

For your own numbers, request a scenario review with Lendmire.

About Lendmire

Lendmire (NMLS# 2371349) is a mortgage brokerage serving homeowners and home buyers in 16 states. FHA, VA, conventional and jumbo purchase and refinance loans are arranged through wholesale lending channels; Lendmire brokers the financing and the lender underwrites each application. Scotsman Guide named Lendmire a Top Mortgage Workplace in both 2025 and 2026.

References

1. HUD Handbook 4000.1 servicing text (ML 2025-06)

2. HUD Mortgagee Letter 2023-05, Reduction of FHA Annual MIP Rates

3. HUD Loan Balance at Final MIP Date tool

4. HUD FHA Resource Center Q&A on MIP duration