The Home Affordable Refinance Program (HARP) was created to help homeowners refinance their mortgages to more affordable interest rates, when ordinarily it would not be possible due to lack of equity. Known as being “upside down” or “underwater” in their mortgage, equity-poor homeowners owe more money on their mortgage than their home is worth, making it nearly impossible to refinance through conventional methods.
Millions of Americans were faced with negative equity during the housing crisis. People who bought homes during the market peak, when prices were high, were hit especially hard after home values plummeted. Even today, after the housing market has begun to recover significantly, many underwater homeowners continue to struggle. Thankfully, HARP offers qualifying homeowners a way to take advantage of today’s lower mortgage rates.
In order to qualify for a HARP refinance, the borrower must meet certain criteria and guidelines. Namely, the loan being refinanced must be owned or guaranteed by Fannie Mae or Freddie Mac. Furthermore, the loan must have been sold to Fannie or Freddie prior to 5/31/2009. To find out if your home loan is owned by Fannie or Freddie, you can look it up on the Fannie Mae and Freddie Mac websites.
Other guidelines include…
- The current loan-to-value (LTV) ratio must be above 80%. There is no LTV cap.
- You cannot have already gotten a HARP refinance.
- You cannot have any late payments over the past 12 months.
- Primary residences, second homes, and investment properties may be eligible.
So what are the benefits of HARP refinancing?
The most obvious benefit is the ability to refinance to a lower mortgage rate. This will not only save you money on your monthly mortgage payment, it will help you save a considerable amount of money over the remainder of the loan.
According to Freddie Mac, borrowers who refinanced through HARP in the first half of 2010 saved an average of $125 to $150 a month on their mortgage payments. The larger the loan, and the higher the original interest rate, the bigger the savings – which means HARP refinancing might not be a cost-effective solution for everyone. If you’re only saving $90 a month by refinancing to HARP, it may take a few years to reach the breakeven point (the point at which the amount of money saved is equal to the closing costs).
There are online calculators you can use to determine the break even point when refinancing; however, it may be better to contact a reputable HARP mortgage lender to discuss the process. If you contact Mid America Mortgage, Inc., one of our licensed mortgage professionals can determine the break even point for you and help you decide whether refinancing makes the most financial sense for your situation.
But there are other benefits to HARP. If you’ve got an adjustable rate mortgage (ARM) and want to enjoy the security of a fixed rate, you can use HARP to switch into a fixed rate loan program. This can be especially wise to do when rates are trending lower.
Mid America Mortgage, Inc. proudly offers HARP refinancing to our qualified borrowers. If you’re not sure about your qualifications, or would like to weigh the benefits and costs of a HARP refinance, please contact us at 866-544-7013, or submit your information through our online Rate Quote form.