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CalcMax

FHA Loan Calculator

Range: 10,000 – 10,000,000

Range: 0 – 90

Range: 0 – 30

Range: 12 – 360

Range: 0 – 2.25

Range: 0 – 1

Result

49,141.98

Total cost of mortgage insurance

Monthly total
2,662.49
Mortgage insurance per month
180.01
Upfront mortgage insurance
6,755.00
Base loan amount
386,000.00
Loan amount including the upfront premium
392,755.00
Loan-to-value (%)
96.50%
Annual mortgage insurance applied (%)
0.55%
Months the annual premium runs
360
Principal and interest per month
2,482.48
Total interest
500,936.57

An FHA loan carries two mortgage insurance premiums, and neither of them is the interest. The first — the upfront MIP — is paid once, at closing, and is normally financed straight into the loan rather than paid in cash: on a 400,000 home with 3.5% down, the base loan is 386,000 and the upfront premium is 1.75% of that, or 6,755, which brings the loan to 392,755. The second — the annual MIP — is charged every month, and it is the one that quietly becomes the larger number. It is not a fixed amount and it is not charged on the original balance: the statute defines the base as the remaining insured principal balance, so it declines as the loan is repaid. On the same loan the first monthly premium is 180.01 and the last one, in the final year, is a few cents. There is a third thing that decides how much the second premium costs, and it is the reason this page exists rather than a second calculator with the same inputs. The premium rate steps up when the loan-to-value ratio is above 95%, and the length of time it is charged steps up when the ratio is at or above 90%. On 400,000, 3.5% down gives a ratio of 96.5%, which means the higher rate and the full term: 360 monthly premiums totalling 49,141.98 on top of 500,936.57 of interest. Put 20% down and the ratio falls to 80%, which brings the lower rate and cuts the premium to the first 132 months — 11 years, not 30 — for a total of 22,148.49. The two premiums together are the difference between what the rate suggests the loan costs and what the loan costs, and the table below walks the down payment from 3.5% to 20% so that both switches are visible on one screen.

400,000 home at 6.5% over 30 years, by down payment

Down payment (%)Loan-to-value (%)First monthly premiumMonths chargedTotal insurance
3.596.5180.0136049141.98
595161.136044584.71
1090152.6336042237.79
2080135.6713222148.49

Four rungs, and the two statutory thresholds fall between them rather than on them, which is why the columns do not move together. The first row is above 95%, so it gets the higher rate and the full term. The second row lands exactly on 95%, and only the rate changes — the duration test is a different line at 90%, so the premium still runs 360 months. The fourth row is under 90%, and there both switches flip: the rate falls and the duration collapses to 132 months. That last column is the point of the table: 49,141.98 at 3.5% down against 22,148.49 at 20%, a difference of 26,993.49 that no rate quote would show you.

Formula

Base loan = home price − down payment. Upfront premium = base loan × upfront rate. Total loan = base loan + upfront premium. Annual premium for a period = previous balance × annual rate ÷ 12. Premium months = the lesser of the term and 11 years when the ratio is under 90%, otherwise the lesser of the term and 30 years.

P
Home price
d
Down payment, as a share of the price
L
Loan-to-value ratio: the base loan divided by the home price, before the upfront premium is added
u
Upfront premium rate, as a percentage of the base loan
a
Annual premium rate, as a percentage of the remaining balance each year
m
Number of months the annual premium is charged: 132 or the term, whichever is smaller, when the ratio is under 90%, otherwise 360 or the term
N
Term in months

Use it whenever an FHA quote is on the table and you want the whole cost rather than the payment. The rate alone will not tell you: two loans at the same rate and the same term can differ by more than twenty thousand in insurance, purely because the down payment landed on one side of the 95% or the 90% line. Enter the price and the down payment first, then read the ratio and the applied rate together — if the applied rate is lower than the one you entered, the loan-to-value ratio brought it under the statutory cap, and that is worth knowing before the lender tells you. Then look at the months column: 132 and 360 are the two possible answers for the length, and the gap between them is the single largest lever on this page. Finally, note that the upfront premium is inside the loan, so it is also being charged interest for the whole term; the total interest figure on any row already includes that.

Worked examples

  1. 400,000 with 3.5% down, 6.5% over 30 years

    1. Down payment: 400,000 × 3.5% = 14,000, so the base loan is 386,000
    2. Loan-to-value ratio: 386,000 ÷ 400,000 = 96.5%, which is above 95%, so the annual rate stays at the higher statutory cap of 0.55% and the premium runs the full 360 months
    3. Upfront premium: 386,000 × 1.75% = 6,755, financed, bringing the loan to 392,755
    4. First monthly premium: 392,755 × 0.55% ÷ 12 = 180.01
    5. Principal and interest: 392,755 at 6.5% over 360 months = 2,482.48 a month
    6. Monthly total: 2,482.48 + 180.01 = 2,662.49
    7. Insurance over the life of the loan: 360 premiums on a declining balance, 49,141.98

    The case most FHA borrowers are actually in, and the one where both switches are in the expensive position. The ratio of 96.5% is above the 95% line, so the higher rate applies, and it is at or above the 90% line, so the premium is charged for the whole thirty years rather than eleven. The consequence is that the insurance costs 49,141.98, which is 9.8% of the interest bill and is not visible in the rate at all.

  2. The same home with 20% down

    1. Down payment: 400,000 × 20% = 80,000, so the base loan is 320,000
    2. Loan-to-value ratio: 320,000 ÷ 400,000 = 80%, which is under 90%, so the premium stops after 11 years — 132 months
    3. It is also under 95%, so the annual rate is the lower statutory cap: 0.55% was entered and 0.50% is applied
    4. Upfront premium: 320,000 × 1.75% = 5,600, bringing the loan to 325,600
    5. First monthly premium: 325,600 × 0.50% ÷ 12 = 135.67
    6. Principal and interest: 325,600 at 6.5% over 360 months = 2,058.01
    7. Insurance over the life of the loan: 132 premiums, 22,148.49 — less than half of the 49,141.98 on the 3.5% case

    Two switches flip at once here, and the visible one is not the important one. The monthly premium falls from 180.01 to 135.67, which is a 44.34 difference — noticeable but not dramatic. The number that matters is 132: the premium stops after eleven years instead of thirty, and that is what takes the lifetime cost from 49,141.98 to 22,148.49. Note also that the entered rate of 0.55% was not the rate used; 0.50% is reported back as the applied rate, because the lower ratio brought the loan under the statutory cap.

  3. 5% down, landing exactly on a 95% ratio

    1. Down payment: 400,000 × 5% = 20,000, so the base loan is 380,000
    2. Loan-to-value ratio: 380,000 ÷ 400,000 = 95%, which is exactly on the line
    3. The higher rate applies only above 95%, so at exactly 95% the lower cap of 0.50% is applied, not 0.55%
    4. The 90% line is a different test: at or above 90% the premium runs the full term, so 360 months
    5. Upfront premium: 380,000 × 1.75% = 6,650, bringing the loan to 386,650
    6. First monthly premium: 386,650 × 0.50% ÷ 12 = 161.10
    7. Insurance over the life of the loan: 360 premiums, 44,584.71

    One percentage point of down payment moves the ratio from 96.5% to exactly 95%, and the two statutory tests disagree about what that means: the rate drops to the lower cap because the higher one applies only above 95%, while the duration stays at the full term because that test is at or above 90%. The result is a page that looks like it contradicts itself until both thresholds are read as written. It is also the cheapest single point of down payment per dollar on the whole ladder — a 1.5 point increase in the down payment removes 4,557.27 of insurance.

Limitations

The two premium rates are inputs rather than constants, and that is deliberate: the statute sets ceilings and leaves the actual numbers to the Commissioner, who revises them, so a figure hard-coded here would go stale without anything failing. The defaults are the statutory maxima for a 30-year loan above 95% loan-to-value and the standard rate below it, but they are not a quotation and they are not a claim about what any lender charges today. The model also assumes the premium is charged on the declining balance as the statute defines it, which is right, and simplifies two things that are not: it does not model the month in which the premium stops with a partial-period adjustment, and it does not model the case where the loan is paid off early, in which case the premiums stop too and the lifetime figure here overstates the cost. Closing costs, the funded escrow for taxes and insurance, and any lender fees are all absent. The upfront premium is financed, which this model does show, but whether a particular borrower is allowed to finance it, and whether the total loan then fits under the county limit, is a question this page cannot answer. And no currency is attached to any figure.

Frequently asked questions

What is the difference between the upfront and the annual premium?
The upfront one is charged once at closing and is usually financed into the loan, so it also accrues interest: 1.75% of the base loan, 6,755 on a 386,000 loan, which raises the amount borrowed to 392,755. The annual one is charged every month — 180.01 in the first month on that loan — and it is calculated on the remaining balance, so it shrinks over time.
How long is the annual premium charged?
It depends on the loan-to-value ratio. Under 90%, the premium runs for the first 11 years, which is 132 months. At or above 90%, it runs for the lesser of the term and 30 years, so on a 30-year loan that is the whole term. The gap between those two answers is the largest single lever on the page: 49,141.98 against 22,148.49 on the same home.
Why did the calculator use a lower rate than I entered?
Because the higher annual rate applies only where the loan-to-value ratio exceeds 95%, and the statute caps it. Enter the standard 0.55% on a loan at exactly 95% and the applied rate comes back as 0.50%. The applied figure is printed as its own output rather than silently substituted, so the difference is visible on the page.
Which balance is the monthly premium charged on?
The remaining insured principal balance, which the regulation defines as a 12-month average of what is outstanding, so it declines as the loan is repaid. The model here applies the rate to the declining balance month by month. Note that the base includes the financed upfront premium, which is why the first monthly charge is computed on 392,755 and not on 386,000.
Are the two rates on this page what I will actually be charged?
They are inputs, with the statutory maxima as defaults. The regulation sets ceilings and leaves the actual rates to the Commissioner, who revises them, so a number hard-coded as a constant would go out of date without anything failing. Treat the defaults as the ceiling case and put in the rates your lender quotes.
Does paying the loan off early reduce the insurance?
Yes, and this page does not model it, which is a known overstatement. If the loan is repaid early the premiums stop, so the lifetime figure shown here is the cost of carrying the loan to the end of its term. The monthly figures are unaffected by that, since they are computed on the balance at the time.
What is not included?
Closing costs, the escrow a lender collects for property taxes and insurance, and any lender fees. The model also assumes the term and the rate are fixed for the life of the loan. And no currency is attached to any figure.

References

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