What is HARP refinancing?
Refinancing can help a homeowner by initiating a new mortgage loan with better terms to pay off and replace the current loan. In an effort to help stabilize the housing market, the government developed the Home Affordable Refinance Program (HARP) with two primary goals in mind:
1. To help homeowners who do not have enough equity for a traditional refinance
2. To help homeowners who are having problems making payments on current mortgages.
HARP was first released with similar risk-based pricing similar to conventional loans. Homeowners who qualified for HARP found that the new higher credit requirements for conventional loans made them too expensive. Even though homeowners expected a 4.5%, 30 year interest rate, they were often offered 6%+ rates.
Therefore, in an effort to help homeowners who had these lower credit requirements get a decent rate, the government responded by implementing an adjustment cap equivalent to about .5% to the homeowners interest rate. For example, if 30 year fixed HARP loans were at 4.5%, everybody who qualified for HARP would only pay 5% or less, depending on their qualifications.
Am I eligible for a HARP loan?
If you meet the following criteria, you should ask you lender if you qualify for HARP:
· your current loan is owned by either Freddie Mac or Fannie Mae,
· you have demonstrated financial stability by making all payments on your current loan for at least the past 12 months, and
· the balance on your first mortgage must be under 125 percent of your home’s current value.
Qualifying properties include:
· primary residences, secondary residences, and multi-family properties with four or less units;
· owner-occupied and investment properties
What are the benefits to refinancing with a HARP loan?
HARP loans can reduce a borrower’s mortgage interest expenses in one of two ways.
1. More debt stability. While a fixed-rate mortgage may raise your mortgage payments, more of that payment will be applied to the principal on the loan so your debt will be paid down faster.
2. For homeowners who incurred a high interest rate when they bought their home, the ability to refinance at current rates can lead to more affordable mortgage payments.
3. While refinancing under HARP does not change your current obligation to carry private mortgage insurance or allow you to add other debts to the amount financed in the HARP loan, some closing costs may be financed, and could result in case back of up to $250.00.
The HARP was recently extended until June, 2011, Therefore, if you are currently a homeowner struggling with high mortgage payments and a lack of traditional refinancing options, this may be the program for you.
For information on qualifying for the HARP program, visit: www.usmortgagerelief.org.