Cash required at closing
$14,000
Enter the price, your down payment and the conventional rate. The calculator prices both routes over the years you keep the loan and reports the FHA rate at which the two break even.
Assumptions this tool makes. Both routes are for the same property at the price entered, with the same down payment, and the term is 30 years on both sides: the annual premium table for terms of 15 years or less carries different rates and is not modelled here, so no term is offered rather than offering a choice that would be half counted. The conventional rate is the one you enter and the FHA rate is that rate less the amount you enter as the quote difference, which defaults to zero so that nothing about the market is assumed; FHA rates are set lender by lender and no national published series exists, which is why the calculator reports the FHA rate that would tie rather than an FHA rate to compare against. The FHA upfront premium is 175 basis points of the base loan amount, charged on every mortgage, and is added to the balance; the FHA annual premium is the rate in HUD's current schedule for a term longer than 15 years, chosen by the base loan amount against the national conforming loan limit and by the loan-to-value, and it is recalculated each year on the outstanding balance rather than fixed on the original amount. Loan-to-value is the base loan divided by the price, before the financed premium is added. The conventional premium is modelled as a level monthly charge equal to the rate entered applied to the original loan amount, running until the balance first reaches 78% of the price, which is the automatic termination line in the Homeowners Protection Act; a borrower may instead ask for cancellation at 80%, which arrives earlier and is the subject of the PMI removal date calculator. The premium rate is an input because insurers price it on credit score, down payment, loan amount and loan type; the default is the low end of the range Fannie Mae published for 2022 and is not a quote for any borrower, and a borrower whose credit score puts them higher in that range moves every FHA figure on this page closer to winning. Costs are interest paid and premiums paid, and principal is excluded because both routes buy the same property and the balance is repaid from the sale; the one exception is the financed upfront premium, which is counted in full whenever the loan is taken, because it buys nothing and would have to be repaid from the sale if the loan ends early. Closing costs, property tax, homeowners insurance, HOA dues, loan-level price adjustments for a high loan-to-value ratio, seller concessions and any refund of the upfront premium are all absent. Where an FHA base loan exceeds the national conforming loan limit the higher premium band is applied, but FHA also has its own maximum mortgage limits by county, which this page does not check, so a loan in the higher band here may not be insurable in every area. The holding period applies to the interest and premium comparison; the FHA premium is capped by its own duration and by the term, so a holding period longer than either stops adding to it. Selling before the premiums would have ended, refinancing into a conventional loan to shed the FHA premium, and investing the cash left over from a smaller down payment are different calculations and none of them is performed here.
| Down payment | Loan-to-value | FHA annual rate | FHA premium runs | PMI runs | Extra cost of the FHA route | FHA rate that ties |
|---|---|---|---|---|---|---|
| 3.5% down | 96.5% | 0.55% | 30y | 12y 9m | +$9,196 | 7.16% |
| 5% down | 95.0% | 0.50% | 30y | 12y 3m | +$7,252 | 7.21% |
| 10% down | 90.0% | 0.50% | 11y | 10y | +$6,871 | 7.21% |
| 15% down | 85.0% | 0.50% | 11y | 7y | +$12,405 | 7.04% |
| 20% down | 80.0% | 0.50% | 11y | 0m | +$24,667 | 6.65% |
| Kept for | FHA annual premium | Conventional premium | Extra cost of the FHA route | FHA rate that ties |
|---|---|---|---|---|
| 5 years | $10,400 | $11,194 | +$8,397 | 6.97% |
| 10 years | $20,122 | $22,388 | +$9,196 | 7.16% |
| 15 years | $28,864 | $28,545 | +$13,814 | 7.16% |
| 30 years | $43,781 | $28,545 | +$32,073 | 7.06% |
| Conventional premium rate | Premium each month | Premium over the holding period | Extra cost of the FHA route | FHA rate that ties |
|---|---|---|---|---|
| 0.58% | $186.57 | $22,388 | +$9,196 | 7.16% |
| 1.00% | $321.67 | $38,600 | -$7,016 | 7.57% |
| 1.25% | $402.08 | $48,250 | -$16,666 | 7.81% |
| 1.50% | $482.50 | $57,900 | -$26,316 | 8.05% |
| 1.86% | $598.30 | $71,796 | -$40,212 | 8.40% |
An FHA loan and a conventional loan buy the same house with the same down payment at the same rate, and they differ in what they charge to insure the lender against a loss. Both amortise a balance in equal monthly payments over a fixed term, and both end when the balance is gone. The insurance is where the two structures part: the FHA route charges 1.75% of the loan as a single upfront premium and an annual premium that can run for the whole term, while the conventional route charges nothing at 20% down and, below that, a monthly premium that stops at a fixed point in the loan's life.
The 20% line belongs to the loan program rather than to the law. Fannie Mae's material on private mortgage insurance describes it as usually required on a conventional loan when the buyer puts down less than 20% of the home's value, and the same page notes that a borrower may be able to put down as little as 3%. The FHA program takes 3.5% instead, and it charges for its insurance in a different shape: one premium at closing and one charged every year, with the annual rate set by the size of the loan and the loan-to-value rather than by the credit score.
On the default figures a $400,000 purchase with 3.5% down leaves a $386,000 base loan at 96.5% loan-to-value. The FHA upfront premium is $6,755, which is 1.75% of that base loan and is usually added to the balance, giving a $392,755 loan and a monthly principal-and-interest payment of $2,719.36. The annual premium is charged at 0.55% of the base loan and runs for the full term of 360 months. The conventional route on the same purchase would carry a 0.58% premium of $186.57 a month, ending at month 153.
The FHA upfront premium is 1.75% of the base loan amount on every mortgage, and no down payment removes it. On the default purchase that is $6,755 at 3.5% down, $6,650 at 5%, $6,300 at 10%, $5,950 at 15% and $5,600 at 20%. The premium falls as the down payment grows only because the loan it is charged on is smaller; nothing in the schedule switches it off, and there is no line to cross.
Financing the premium is what turns it into a running cost. The $6,755 is normally added to the balance, so the loan is $392,755 rather than $386,000 and the payment is $46.77 a month higher. Over ten years that is $5,613 of extra payments, $4,707 of which is interest, and because the premium sits inside the balance, a borrower who sells at that point still owes about $5,850 of it. That is why the calculator counts the whole premium as a cost of taking the loan no matter when the loan ends: the part that has not been amortised yet is not forgiven, it is repaid out of the sale.
Set against the $6,755, the annual premium is the smaller number, and it is not always the larger cost either. Over ten years the FHA annual premium comes to $20,122 and the conventional premium to $22,388, so at the published low end the FHA rate is the cheaper of the two. The FHA route still costs more, because the financed upfront premium and the interest on it add to $11,462 while the premium saving is $2,266.
The FHA annual premium table has a duration column, and its edge is a cliff rather than a slope. At or below 90%% loan-to-value the premium stops after 11 years. Above it the premium runs for the whole mortgage term, which is 360 months on a 30-year loan. A borrower who puts 5% down therefore pays the annual premium for 30 years while a borrower who puts 10% down pays it for 11, and one percentage point of loan-to-value is the whole difference between them.
HUD's Mortgagee Letter 2023-05 is the source of both the rates and the durations. Its table for mortgage terms longer than 15 years gives 0.50% at or below 90%% loan-to-value, 0.50% above that up to 95%, and 0.55% above 95%, with the same three rows at 0.70%, 0.70% and 0.75% for a base loan above the national conforming loan limit. The duration column reads 11 years on the first row of each pair and the mortgage term on the other two.
| Down payment | Loan-to-value | FHA annual rate | FHA premium runs | PMI runs | Extra cost over ten years | FHA rate that ties |
|---|---|---|---|---|---|---|
| 3.5% down | 96.5% | 0.55% | 30y | 12y 9m | +$9,196 | 7.16% |
| 5% down | 95.0% | 0.50% | 30y | 12y 3m | +$7,252 | 7.21% |
| 10% down | 90.0% | 0.50% | 11y | 10y | +$6,871 | 7.21% |
| 15% down | 85.0% | 0.50% | 11y | 7y | +$12,405 | 7.04% |
| 20% down | 80.0% | 0.50% | 11y | 0m | +$24,667 | 6.65% |
A $400,000 purchase at 7.40% over 30 years with a 0.58% conventional premium, kept ten years, with the down payment varied
The ladder shows three things at once. The annual rate steps down from 0.55% to 0.50% when the down payment reaches 5%, because 95% loan-to-value is the second line in the table. The duration collapses from 30 years to 11 when the down payment reaches 10%, and that step is worth more than the rate change: at 5% down the FHA annual premium over ten years is $18,008 and at 10% down it is $17,060, while the conventional premium falls from $22,040 to $20,880 over the same step. The down payment that shortens the FHA premium is worth about $2,000 of it over ten years, against the $1,446 of conventional premium that the same step removes.
The 20% line is where the two programs stop resembling each other. At 20% down the conventional loan carries no premium at all, while the FHA loan still carries 0.50% for 11 years — $15,165 on this purchase — and that row is the widest gap in the table, $24,667 over ten years. The FHA premium has no 20% line to cross. Its own line sits at 90%% loan-to-value, and crossing it shortens the premium rather than removing it.
The FHA annual rate is frequently below the conventional premium it is measured against, and it does not move with the credit score. On the default purchase 0.55% of the base loan is $176.92 a month; the conventional premium at 0.58%, the low end of the range Fannie Mae published, is $186.57 a month, and it would be higher for a weaker credit score while the FHA figure would not change. Over ten years the FHA annual premium comes to $20,122 against $22,388.
A lower annual rate does not settle the comparison, because the FHA route has paid its 1.75% before the first annual premium falls due. Over ten years the premium saving is $2,266 against an upfront premium and interest bill of $11,462, so the FHA route is $9,196 behind at equal rates. The conventional premium has to be about 40% higher than the published low end before the annual side of the comparison outweighs the charge at closing.
The premium rate is the input that can flip the answer, and it is set by the insurer rather than chosen by the borrower. Fannie Mae published a range of 0.58% to 1.86% a year of the loan amount for 2022. Across that range the FHA route goes from costing $9,196 more over ten years to costing $40,212 less, and the FHA rate that ties rises from 7.16% to 8.40%, so at the top of the published range an FHA rate a full point above the conventional rate still breaks even.
| Conventional premium rate | Premium each month | Premium over ten years | Extra cost of the FHA route | FHA rate that ties |
|---|---|---|---|---|
| 0.58% | $186.57 | $22,388 | +$9,196 | 7.16% |
| 1.00% | $321.67 | $38,600 | -$7,016 | 7.57% |
| 1.25% | $402.08 | $48,250 | -$16,666 | 7.81% |
| 1.50% | $482.50 | $57,900 | -$26,316 | 8.05% |
| 1.86% | $598.30 | $71,796 | -$40,212 | 8.40% |
The default purchase and rate, kept ten years, with the conventional premium varied across Fannie Mae's published range
The premium rate at which the two routes tie on the default figures is 0.82% a year, and it can be recovered from three numbers the calculator reports. The upfront premium of $6,755, the extra interest of $4,707 and the FHA annual premium over the holding period of $20,122 add to $31,584; divided by the base loan of $386,000 and by the 120 months of the holding period, and multiplied by 1,200, that is 0.82%. Below that premium rate the conventional route is the cheaper one on these figures, and above it the FHA route is, which is the whole of what the premium schedule decides.
The useful answer is a threshold rather than a verdict, because FHA rates are set lender by lender: the FHA rate at which the two routes cost the same over the years the borrower keeps the loan. On the default figures that rate is 7.16%, which is 0.24 percentage points below the 7.40% conventional rate. An FHA quote under 7.16% leaves the FHA route cheaper; a quote above it does not, whatever the annual premium rate looks like on its own.
The threshold is close to constant where the other inputs change most, and it follows the market rather than lagging it. With everything else at the default, the tie rate is 6.18% when the conventional rate is 6.40% and 8.14% when it is 8.40% — a required edge of 0.22 and 0.26 points — while the cost of the FHA route moves only from $8,321 to $10,053. Both sides of the comparison are dominated by interest on the same balance, and the $6,755 upfront premium is the part that does not scale with the rate.
| Kept for | FHA annual premium | Conventional premium | Extra cost of the FHA route | FHA rate that ties |
|---|---|---|---|---|
| 5 years | $10,400 | $11,194 | +$8,397 | 6.97% |
| 10 years | $20,122 | $22,388 | +$9,196 | 7.16% |
| 15 years | $28,864 | $28,545 | +$13,814 | 7.16% |
| 30 years | $43,781 | $28,545 | +$32,073 | 7.06% |
The default purchase at 3.5% down, with the holding period varied
The holding period moves the threshold far more than the rate does, and it does so in the direction borrowers least expect. Over one year the FHA route costs $7,137 more and needs a rate 1.82 points below the conventional one before it breaks even, because a $6,755 charge taken at closing cannot be recovered out of one year of a cheaper premium. Over two years the required edge is 0.96 points, over five years 0.43, and at ten years 0.24. On these figures the FHA route cannot pay for its own upfront premium inside a year unless the FHA rate is far below the conventional rate, which is the arithmetic case against taking it for a short holding period.
| Over ten years | FHA route | Conventional route |
|---|---|---|
| Upfront premium | $6,755 | $0 |
| Annual premium | $20,122 | $22,388 |
| Interest paid | $273,704 | $268,997 |
| Total cost | $300,581 | $291,385 |
| Difference | +$9,196 | — |
Where the $9,196 comes from, on the default purchase kept ten years
Read across the rows, the FHA route loses on both of the charges the borrower controls and wins on the one they do not. Its premiums over ten years are $2,266 below the conventional route's, because the annual rate is lower; its interest is $4,707 higher, because it is paying interest on the premium it financed; and its upfront premium is $6,755. The three add to the $9,196 that the rate edge has to recover, and at the reported threshold it very nearly does: lowering the FHA rate from 7.40% to 7.16% saves $9,527 of interest over ten years. The threshold is reported to the nearest hundredth of a point, so at 7.16% the FHA route is already slightly ahead, by $376.
Three of the reported figures can be checked without a calculator, and each is a single multiplication. The upfront premium is 1.75% of the $386,000 base loan, which is $6,755. The FHA annual premium is 0.55% of the same base loan a year, which is $2,123 a year, or $176.92 a month. The conventional premium is 0.58% of it, which is $186.57 a month.
The annual premium is charged on the outstanding balance rather than on the original amount, and over a full term the difference is not small. A flat 0.55% of $386,000 for 360 months would be $63,690; the calculator reports $43,781, and the $19,909 between those two figures is what recalculating the rate on the declining balance each year removes. A borrower checking the monthly figure against a servicer statement should expect the first year's, not the average.
The conventional premium runs from the first month until the balance reaches 78%% of the price, which on this loan is month 153, so its total over its own run is 153 payments of $186.57, or $28,545. The FHA annual premium over ten years is 120 monthly amounts on a declining balance, which totals $20,122. Neither is the upfront premium, which is the $6,755 charged once and carried in the balance.
The threshold follows from those numbers. The FHA route is $6,755 behind on the upfront premium, $4,707 behind on interest and $2,266 ahead on the annual premium, so it is $9,196 behind at equal rates. On a balance of $392,755 over ten years, a rate 0.24 points lower recovers that. As a rule of thumb on these figures the required edge is the extra cost divided by the loan amount and the number of years: $9,196 divided by $392,755 divided by ten is 0.23 points, against the 0.24 the calculator reports.
A few cents of disagreement with your own working is the rounding order. More than that means one of the two implementations is wrong, and the corrections page explains how to report it.
Not on the rate alone, and not on the insurance alone. On the default figures an FHA loan costs $9,196 more than the same loan done conventionally over ten years at equal rates, because the upfront premium is 1.75% of the loan and is charged whatever the down payment, while the annual premium is cheaper than the conventional one. The FHA route wins when its rate is at least 0.24 percentage points below the conventional rate on those figures, or when the conventional premium is quoted above about 0.82% a year.
The upfront premium is 175 basis points, or 1.75%, of the base loan amount on every FHA mortgage, as set in HUD's Mortgagee Letter 2023-05. On a $400,000 purchase with 3.5% down the base loan is $386,000 and the premium is $6,755. It is normally added to the balance rather than paid in cash, which raises the loan and the monthly payment, and the interest on it is a real part of what the FHA route costs over the years the loan is kept.
For a term longer than 15 years, the annual premium runs for 11 years when the loan-to-value at closing is 90%% or less, and for the whole mortgage term when it is above that. On a 30-year loan with 3.5% down, which is 96.5% loan-to-value, the annual premium runs for all 360 months. The duration comes from the table in HUD's Mortgagee Letter 2023-05 and was not changed by the rate reduction that letter made.
The FHA annual premium is not switched off by equity. Its duration is fixed by the loan-to-value at closing and by the mortgage term, which is why a loan taken at 96.5% loan-to-value pays the premium for the full term however fast the balance falls. The 80% and 78% lines that end a conventional premium come from the Homeowners Protection Act, which is about private mortgage insurance; the PMI removal date calculator works out when those arrive on a conventional loan.
Mortgagee Letter 2023-05 amends the base loan amount threshold that selects the premium rate to the national conforming loan limit, and the figure printed in the letter, $726,200, was the limit for 2023. FHFA set the 2026 baseline limit at $832,750 for one-unit properties, an increase of $26,250 over 2025, so that is the figure this calculator uses. The higher band applies at 70 and 75 basis points rather than 50 and 55. FHA also has its own maximum mortgage limits by county, which this page does not check.
Selling stops the annual premium but returns none of the interest already paid and leaves whatever part of the financed upfront premium has not been amortised to be repaid from the sale. On the default figures a five-year hold costs $8,397 more than the conventional route and a ten-year hold $9,196, against $32,073 over thirty years, because the upfront premium is a fixed charge that a short holding period cannot spread. The FHA rate needed to break even is 1.82 points below the conventional rate over one year and 0.24 over ten.
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Cluster us/mortgage · Unit us-mortgage-fha-vs-conventional-calculator · Engine amortizing-loan / fha · Method: Both routes buy the same property with the same down payment, so the conventional balance is the price less the down payment and the FHA base loan is the same figure. The FHA upfront premium is 175 basis points of the base loan amount, is added to the balance, and the payment is the standard amortizing payment on that larger balance over 30 years. The FHA annual premium is set by the base loan amount against the national conforming loan limit and by the loan-to-value, is recalculated each year on the outstanding balance and charged monthly at one twelfth of that year's figure, and runs for 11 years at or below 90% loan-to-value and for the whole term above it. The conventional premium is a level monthly charge at the rate entered, running from the first month until the balance on the original amortization schedule first reaches 78% of the price, which is the automatic termination line in the Homeowners Protection Act. Costs counted are interest paid and premiums paid; principal is excluded because both routes buy the same property and the balance is repaid from the sale, except the financed upfront premium, which is counted in full whenever the loan is taken because it buys nothing and would be repaid from the sale. The break-even rate is the highest FHA rate, to the nearest hundredth of a percentage point, at which the FHA route is no longer the more expensive of the two over the holding period entered.