HARP, or the Home Affordable Refinance Program, is a great way to refinance your mortgage and save a ton of money in interest charges.
HARP allows homeowners who have little or no equity in their homes to refinance their mortgages and get lower interest rates. You can even refinance if your mortgage is upside down.
The program was due to expire in September, but it has been extended through December 2018, adding 15 months to this popular initiative.
The 2008 housing crisis left many homeowners owing more on their mortgages than their homes were worth. The rate of foreclosures rose 81 percent in 2008 alone and more than 860,000 homeowners lost their homes.
In 2009, mortgage finance giants Fannie Mae and Freddie Mac launched HARP. More than 3.4 million homeowners have refinanced their mortgages through HARP since then.
By refinancing your home through HARP, you may be able to reduce the interest you pay.
If you don’t want to start over with a 30-year mortgage, that’s OK. Your loan terms can be set from 10 to 30 years. HARP also offers a streamlined refinancing process that requires less documentation than traditional refinance programs.
For homeowners whose mortgage rates are much higher than current interest rates, they’re likely see an immediate drop in their house payments.
HARP loans are specifically designed for homeowners whose mortgages have a loan-to-value ratio of 80 percent or more.
To calculate your LTV ratio, divide the amount of money you owe on your mortgage by your home’s appraised value.
For example, if you owe $170,000 on your mortgage and your home’s appraised value is $200,000, your loan-to-value ratio is 85 percent.
You may be eligible to refinance your mortgage through HARP if you meet the following criteria:
- You’re up to date on your mortgage payments, have not been 30 or more days late in the past six months and have not been late more than once in the past 12 months.
- The home is your primary residence, a one-unit second home or a one- to four-unit investment property.
- Your loan is owned by Freddie Mac or Fannie Mae.
- Your loan-to-value ratio is 80 percent or greater.
- You had the mortgage before May 31, 2009.
Many people don’t know if their mortgage is owned by Fannie or Freddie, but you can use their online tools to find out.
If you were previously denied a HARP-sponsored mortgage because you were upside down on your mortgage, it may be time to apply again. Borrowers who owe more on their loan than their homes’ values are now eligible.
Like with refinancing any mortgage, you’ll have to pay closing costs (which can be rolled into your loan). While a lower mortgage payment reduces your monthly expenses, you’ll want to calculate whether the savings in your monthly payment outweigh your costs.
When you apply for your loan, the lender will give you a “Loan Estimate.” This outlines your costs for the life of the loan. Compare these documents to your current loan terms to determine if you’ll come out ahead with your new refinancing package.
If your existing mortgage includes mortgage insurance, you’ll be required to have the same amount of mortgage insurance with your new loan. If your existing mortgage doesn’t have mortgage insurance, you won’t be required to carry it for the new loan.
If you think a HARP refinancing might save you money, gather your most recent financial records, including mortgage statements, pay stubs and income tax returns.
Contact your lender and ask if it participates in HARP. If your lender doesn’t, contact a HARP lender approved by Fannie or Freddie on their websites or on the Federal Housing Finance Agency website.
