I am in the process of re-financing my existing fixed FHA loan to ARM FHA loan and I have a question on the upfront mortgage insurance.
I had paid upfront mortgage insurance on my existing loan ( say $10K). My bank says that I now have to pay the upfront insurance again when i re-finance (say $12K). I will get credit for the upfront mortgage insurance (say $1K) based on number of payments i have made on the existing FHA loan but the credit is only partial. My true insurance cost will therefore be $10K+$12K-$1K = $21K when in reality it should be only $12K.
So doesn't this mean that I will be paying mortgage insurance twice on the same loan ?? This doesn't make any sense to me.
Has anyone been in a similar situation and can provide guidance? Does HUD have any rules on preventing this "double dipping"?
Any help will be much appreciated !!