Question by Brian G: Why do I have to pay the full month of interest when refinancing an FHA loan if paid prior to the end of month?
I am refinancing my FHA mortgage to a conventional loan. My current lender requires that I pay interest until 03/01 even though the loan will be paid off a few days into February by the new lender. Essentially I will be paying interest to two lenders for most of February. I called the current lender and they stated it will not be refunded once the pay-off is received. Anyone know why this is and if there is any way around that?
Answer by Lisa L
Your mortgage payment is paid in arrears unlike rent. So when you paid your Jan mortgage payment you were paying for Dec. FHA requires a full month of interest if not paid off by the 1st day of the month. That is just the way FHA is. You signed paperwork at application & closing telling you that. Your current loan officer should have informed you of this early in the process & should have had you close either by Jan 23 or later in Feb. It is an FHA regulation, not your current mortgage holder’s regulation. There is no way around it. Try to close later in Feb if your lock is not expiring. At least you will save some interest on your new loan.
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