Mortgage Insurance Premium (MIP) Definition
With all FHA-backed loans, borrowers are required to carry insurance on the loan and to pay both an upfront fee, called a mortgage insurance premium, or MIP, and annual mortgage insurance premiums, or AMIPs. Unlike a conventional mortgage, you cannot remove this insurance when the LTV reaches 80%. In fact, most borrowers will have to carry insurance for the life of their loan. This applies to all FHA loans, not just reverse mortgages. However, the situation with HECM loans differs from other loans in some ways.
According to HUD, you will be responsible for an initial, upfront mortgage insurance premium of 2% of the loan’s value. This can be rolled into the loan if you wish, although this increases your costs. After that, you will be charged an annual mortgage insurance premium of 0.5% of the loan’s value. This can also be rolled into the life of the loan if you wish.