Flood Insurance Lending Help

[Rob Suhai]

Hey BP Community, 

I need some advice/help with a little curve ball that was thrown my way with my first rental property. In October I purchased a duplex which I'm currently house-hacking. There is a brook which runs in the back of the house which my lender required flood insurance for. I was able to get the previous owners to transfer their flood policy in my name and everything worked out for closing.  The flood insurance that was transferred over was pretty cheap (1120/yr) which was much more reasonable than any quotes I received.

However last night I got an email from my lender saying that updated flood maps show my current flood insurance isn't adequate and the mortgage company will pretty much tack a flood insurance cost onto the end of my mortgage which could run $200/mo or more. Again this is just a brook, not exactly a coastal flood plain...  I believe the only time water came close to the house was during Hurricane Irene, which most areas in Northern NJ flooded at the time anyway.

The good news is that I have some equity in the home and I think I can refi. The home appraised for 25k more than what I purchased it for, and I put a 20k downpayment, plus the improvements that I've made during the 4 months I've owned the home (paint, flooring, etc.. ) My lender notified me that even if I refi into a conventional loan with them (I currently have an FHA) that the Flood insurance premium would still be there.

My question is does anyone know a lender who will work with me on this flood issue? I really don't want my cash flow to be eaten up by an additional 200.00/mo tacked onto my mortgage (not to mention the flood insurance I'm already paying for that was transferred over from the previous owners). 

As always any ideas or suggestions on how to get around this are greatly appreciated. 

Thanks everyone!