Kamil Ahmad's murder took place hours after Jeffrey Barry, who has paranoid schizophrenia, was released from a psychiatric hospital.
It ended with Barry, 56, slicing off the Kurdish refugee's penis.
Sentencing, Mrs Justice May said the decision to release Barry had been "nothing short of calamitous".
Barry had denied murder but admitted manslaughter by diminished responsibility at Bristol Crown Court.
"Once inside Mr Ahmad's flat, you subjected him to a frenzied attack, and the pathologist describes over 70 separate knife injuries," she said.
Barry was told he would serve at least 23 years.
The court was told Barry had stabbed his 49-year-old neighbour to death at his flat in Wells Road in Bristol at about 02:00 BST on 7 July 2016.
Last month a jury unanimously convicted Barry, who is being held at Broadmoor Hospital, of murder following a two-week trial.
Barry falsely claimed victim Mr Ahmad was a rapist and terrorist.
The jury was told he was racist towards Iraqi-born Mr Ahmad and had previously assaulted him.
A post-mortem examination found injuries to Mr Ahmad included 25 stab wounds to his face and eyes.
Barry had told a community psychiatric nurse he was "criminally insane" in a phone call he made minutes before the fatal attack.
But police discovered a note in his room reading: "The fact is, I have acted out my entire psychiatric history. I'm very well. Sorry."
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