If you find yourself underwater on your mortgage, you could be eligible for the Home Affordable Refinance Program (HARP). The federal program allows qualified homeowners to refinance if they owe more on their mortgage than the value of the home.
Launched in 2009, this program came in the wake of plummeting home values and homeowners struggling to stay current on their mortgage payments. If you qualify, you can get a lower interest rate, which means lower monthly payments. You might be able to change the length of the loan or switch from an adjustable to a fixed rate loan so the monthly payment stays constant.
In 2012, new rules came into play, and some changes were made to the original program to open it to more homeowners. Now, it doesn’t matter how far underwater you are on your loan. The previous cap of 125 percent loan-to-value limits have been erased. In addition, you likely won’t have to go through the appraisal or underwriting process. Fees are at a minimum, and there is less paperwork.
Eligibility requirements
The program runs until Dec. 31, 2015. In order to be eligible, you must meet the following requirements:
- You must be current on your loan with no late payments over 30 days in the past 6 months and not more than one in the past 12 months.
- The home you are seeking to refinance must be your primary home, a one-unit second home, or a one- to four-unit investment property.
- Freddie Mac or Fannie Mae must own your loan.
- Your loan must have been originated on or before May 31, 2009.
- Your current loan to value ratio must be more than 80 percent.
Benefits of a HARP loan
As of February 2014, there had been over 3,100,000 HARP refinances. Twenty-one percent of all refinance activity in February was HARP-related, according to the Federal Housing Finance Agency (FHHA).
Those who obtained a HARP refinance had a lower delinquency rate than those who were eligible but didn’t seek a refinance, according to the FHHA. Twenty-three percent of those who obtained the loan reduced their term to shorter 15- or 20-year periods. In this way, they build equity faster and will pay off the loan sooner.
If you decide to apply for a HARP refinance, you may be able to do so through your current lender. This can be easier because all of your documentation and paperwork is already on file. You can also opt for a new lender. You’ll just need to qualify, and you’ll need to go through the loan process again.
Regardless of whether you choose your existing lender or a new lender, this program is a great way to reduce your monthly interest rates and stay current more comfortably on your mortgage payments.
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