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Monthly (Periodic) Mortgage Insurance Premium Calculation

The formula for calculating monthly mortgage insurance premium became effective May 1, 1998 (see Mortgagee Letter 98-22 Attachment).

Below is the monthly mortgage insurance premium (MIP) calculation with examples and pseudocode using the annual and upfront MIP rates in effect for mortgages assigned an FHA case number before October 4, 2010. See theÂ FHA Single Family Housing Policy Handbook 4000.1, Appendix 1.0 Mortgage Insurance PremiumsÂ [PDF]Â for the annual and upfront MIP rates currently in effect.

 Monthly MIP Computation Steps Example Step 1: Compute annual average outstanding balance based on the original amortization schedule (see below)Â Average Outstanding Balance for 1st amortization year: \$106,160.654166666666 Step 2: Average Outstanding Balance * Annual MIP RateÂ  (round to 2nd decimal place based on value in 3rd decimal place). 106,160.654166666666 x.005 = 530.803270833333333 round to 530.80 Step 3: If MIP financed, divide annual MIP from Step 2 by (1 + Upfront MIP factor)Â  Result rounded to 2nd decimal place based on value in 3rd decimal place. 530.80/ (1 + 0.0225) = 519.1198Â  round to 519.12 Step 4: Divide by 12 and round to nearest cent for Monthly MIP.Â  Result rounded to 2nd decimal place based on value in 3rd decimal place. 519.12/ 12 = 43.26Â  round to 43.26 Step 5: Multiply by 12.Â  This is the Annual Premium. \$519.12

### Computation of Annual Average Outstanding Balance

To start, use the original loan amount as the previous balance. Repeat the following steps for the remaining months in the year (11 iterations). The calculation of subsequent years is the same. The second year will begin with the last result of the first year.

1. Multiply previous balance times annual contract interest rate. Round the result to two (2) decimal places based on value in 3rd decimal place.

2. Divide result by 1200. Round the result to two (2) decimal places based on the value in 3rd decimal place.

4. Subtract P&I payment. Note: For an ARM use original Interest Rate and original P&I through all years. For GEM/GPM compute current P&I based on amortization plan. See table below.

When the final year is computed, total up the 12 results for that year and divide the total by 12.

 AMPLAN RATE OF INCREASE MONTHS OF INCREASE A .025 60 B .050 60 C .075 60 D .020 120 E .030 120 F .049 120 L .010 999 M .020 999 N .030 999 O .040 999 P .050 999

The new monthly P&I for GEM/GPM is not calculated if the twelfth month of the case has not been reached or if the payment number is greater than the maximum number of months.

 Field Value Original Mortgage Amount \$106,605Â Interest Rate 7.5Â Monthly P&I* 745.40Â Annual MIP Rate 0.005Â Upfront Factor 0.0225 Beginning Amortization Date 04/2008Â Today's Date 12/2009

*Based on the original amortization schedule.

Compute the annual average outstanding balance:

 Month/Year Computation Result Year 1 / Month 1Â (Use Original Mortgage Amount) \$106,605.00Â Year 1 / Month 2Â 106,605.00 * 7.5 = 799,537.5000 (round to 799,537.50)Â  799,537.50 / 1200 = 666.28125 (round to 666.28)Â  666.28 + 106,605.00 = 107,271.28Â  107,271.28 - 745.40 = 106,525.88Â \$106,525.88Â Year 1 / Month 3Â 106,525.88 * 7.5 = 798,944.1000 (round to 798,944.10)Â  798,944.10 / 1200 = 665.78675 (round to 665.79)Â  665.79 + 106,525.88 = 107,191.67Â  107,191.67 - 745.40 = 106,446.27Â \$106,446.27Â Year 1 / Month 4Â 106,446.27 * 7.5 = 798,347.025 (round to 798,347.03)Â  798,347.03 / 1200 = 665.2891916 (round to 665.29)Â  665.29 + 106,446.27 = 107,111.56Â  107,111.56 - 745.40 = 106,366.16Â \$106,366.16Â Year 1 / Month 5Â 106,366.16 * 7.5 = 797,746.20 (round to 797,746.20)Â  797,746.20 / 1200 = 664.7885 (round to 664.79)Â  664.79 + 106,366.16 = 107,030.95Â  107,030.95 - 745.40 = 106,285.55Â \$106,285.55Â Year 1 / Month 6Â 106,285.55 * 7.5 = 797,141.625 (round to 797,141.63)Â  797,141.63 / 1200 = 664.2847 (round to 664.28)Â  664.28 + 106,285.55 = 106,949.83Â  106,949.83 - 745.40 = 106,204.43Â \$106,204.43Â Year 1 / Month 7Â 106,204.43 * 7.5 = 796,533.225 (round to 796,533.23)Â  796,533.23 / 1200 = 663.77769 (round to 663.78)Â  663.78 + 106,204.43 = 106,868.21Â  106,868.21 - 745.40 = 106,122.81Â \$106,122.81Â Year 1 / Month 8Â 106,122.81 * 7.5 = 795,921.075 (round to 795,921.08)Â  795,921.08/ 1200 = 663.2675666 (round to 663.27)Â  663.267+ 106,122.81 = 106,786.08Â  106,786.08 - 745.40 = 106,040.68Â \$106,040.68Â Year 1 / Month 9Â 106,040.68 * 7.5 = 795,305.10 (round to 795,305.10)Â  795,305.10 / 1200 = 662.75425 (round to 662.75)Â  662.75 + 106,040.68 = 106,703.43Â  106,703.43 - 745.40 = 105,958.03Â \$105,958.03Â Year 1 / Month 10Â 105,958.03 * 7.5 = 794,685.225 (round to 794,685.23)Â  794,685.23 / 1200 = 662.2376916 (round to 662.24)Â  662.234+ 105,958.03 = 106,620.27Â  106,620.27 - 745.40 = 105,874.87Â \$105,874.87Â Year 1 / Month 11Â 105,874.87 * 7.5 = 794,061.525 (round to 794,061.53)Â  794,061.53 / 1200 = 661.7179416 (round to 661.72)Â  661.72 + 105,874.87 = 106,536.59Â  106,536.59 - 745.40 = 105,791.19Â \$105,791.19Â Year 1 / Month 12Â 105,791.19 * 7.5 = 793,433.925(round to 793,433.93)Â  793,433.93 / 1200 = 661.19494 (round to 661.19) 661.19 + 105,791.19 = 106,452.38Â  106,452.38 - 745.40 = 105,706.98Â \$105,706.98Â
 Total of the Year 1 resultsÂ \$1,273,927.85Â Divided by 12This is the Annual Average Outstanding Balance \$106,160.654166666666Â See Premium Calculation table at beginning of page for remaining steps to calculate Year 1 premium
 Year 2 / Month 1Â 105,706.98 * 7.5 = 792,802.3500 792,802.35 / 1200 = 660.668625 660.67 + 105,706.98 = 106,367.65 106,367.65 - 745.40 = 105,622.25Â \$105,622.25Â Year 2 / Month 2Â 105,622.25 * 7.5 = 792,166.8750 792,166.88 / 1200 = 660.139066 660.14 + 105,622.25 = 106,282.39Â  106,282.39 - 745.40 = 105,536.99Â \$105,536.99Â Year 2 / Month 3Â 105,536.99 * 7.5 = 791,527.4250 791,527.43 / 1200 = 659.60619 659.61 + 105,536.99 = 106,196.60Â  106,196.60 - 745.40 = 105,451.20Â \$105,451.20Â Year 2 / Month 4Â 105,451.20 * 7.5 = 790,884.000 790,884.00 / 1200 = 659.07000 659.07 + 105,451.20 = 106,110.27Â  106,110.27 - 745.40 = 105,364.87Â \$105,364.87Â Year 2 / Month 5Â 105,364.87 * 7.5 = 790,236.5250 790,236.53 / 1200 = 658.53041 658.53 + 105,364.87 = 106,023.40Â  106,023.40 - 745.40 = 105,278.00 \$105,278.00Â Year 2 / Month 6Â 105,278.00 * 7.5 = 789,585.0000 789,585.00 / 1200 = 657.987500 657.99 + 105,278.00 = 105,935.99Â  105,935.99 - 745.40 = 105,190.59Â \$105,190.59Â Year 2 / Month 7Â 105,190.59 * 7.5 = 788,929.4250 788,929.43 / 1200 = 657.441191 657.44 + 105,190.59 = 105,848.03Â  105,848.03 - 745.40 = 105,102.63Â \$105,102.63Â Year 2 / Month 8Â 105,102.63 * 7.5 = 788,269.72500 788,269.73 / 1200 = 656.891441 656.89 + 105,102.63 = 105,759.52Â  105,759.52 - 745.40 = 105,014.12Â \$105,014.12Â Year 2 / Month 9Â 105,014.12 * 7.5 = 787,605.9000 787,605.00 / 1200 = 656.338250 656.34 + 105,014.12 = 105,670.46Â  105,670.46 - 745.40 = 104,925.06Â \$104,925.06Â Year 2 / Month 10Â 104,925.06 * 7.5 = 786,937.95000 786,936.95 / 1200 = 655.781625 655.78 + 104,925.06 = 105,580.84Â  105,580.84 - 745.40 = 104,835.44Â \$104,835.44Â Year 2 / Month 11Â 104,835.44 * 7.5 = 786,265.80000 786,265.80 / 1200 = 655.221500 655.22 + 104,835.44 = 105,490.66Â  105,490.66 - 745.40 = 104,745.26Â \$104,745.26Â Year 2 / Month 12Â 104,745.26 * 7.5 = 785,589.45000 785,588.45 / 1200 = 654.657875 654.66 + 104,745.26 = 105,399.92Â  105,399.92 - 745.40 = 104,654.52 \$104,654.52Â
 Total of the Year 2 resultsÂ \$1,261,720.93Â Divided by 12This is the Annual Average Outstanding Balance \$105,143.410833333333Â Multiplied by the Annual MIP Rate (.005)Â \$525.7170541667Â Rounded to two (2) decimal placesÂ \$525.72Â Divided by 1 + Upfront MIP Factor (1 + .0225)Â \$514.1515892421Â Rounded to two (2) decimal places \$514.15Â Divided by 12Â \$42.8458333333Â Rounded to two (2) decimal placesThis is the Monthly MIP \$42.85Â Multiply Monthly MIP by 12Â  This is the Annual MIP \$514.20

### Pseudocode

#### Input Values

interestÂ  = Interest Rate

mipÂ Â Â Â Â Â  = Annual MIP Rate

monthsÂ Â Â  = Years Since Amortization Date * 12

orig_mtgÂ  = Original Mortgage Amount

p_iÂ Â Â Â Â Â  = Monthly Principal & Interest

upfrontÂ Â  = Upfront MIP Factor

hold_valÂ  = A variable to store intermittent results

total_amt = A variable to sum the last 12 months

BEGIN

Â Â  last_val = orig_mtg

Â Â  total_amt = last_val

Â Â  FOR (I = 2 TO months)

Â Â Â Â Â Â Â  hold_val = last_val * interest

Â Â Â Â Â Â Â  [ROUND hold_val to 2 places after the decimal]

Â Â Â Â Â Â Â  hold_val = hold_val / 1200

Â Â Â Â Â Â Â  [ROUND hold_val to 2 places after the decimal]

Â Â Â Â Â Â Â  hold_val = hold_val + last_val

Â Â Â Â Â Â Â  hold_val = hold_val - p_i

Â Â Â Â Â Â Â  last_val = hold_val

Â Â Â Â Â Â Â  total_amt = total_amt + last_val

Â Â Â Â Â Â Â  IF (REMAINDER(I / 12) = 0) AND (I <> months) THEN

Â Â Â Â Â Â Â Â Â Â  total_amt = 0

Â Â Â Â Â Â Â  END IF

Â Â  NEXT I

Â Â  total_amt = total_amt / 12

Â Â  total_amt = total_amt * mip

Â Â  [ROUND total_amt to 2 places after the decimal]

Â Â  total_amt = total_amt / (1 + upfront)

Â Â  [ROUND total_amt to 2 places after the decimal]

Â Â  total_amt = total_amt / 12

Â Â  [ROUND total_amt to 2 places after the decimal]

Â Â  PRINT:Â  Monthly Premium = total_amt

END
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