Is your home’s loan more than what your property is worth? Are you struggling to pay high-interest rate payments even though you know you could qualify for a lower interest rate? The Home Affordable Refinance Program, also called HARP, may be able to provide some help to individuals. This type of home loan refinance opportunity can provide a new set of loan terms to those who qualify for it.
What Can HARP Do for You?
The Home Affordable Refinance Program is an opportunity to replace your existing home loan with a new one. The new loan will have new terms, interest rates, and details. For many property owners, it is a more affordable option. The benefits to you depend on what the current conditions of your existing loan are. However, HARP is helping many people in a variety of ways. Here are a few ways the Home Affordable program may help you:
Lower Interest Rates
A lower interest rate means you will pay less on the home loan overall. If the interest rates available to you now are one or more percent lower than what you are paying, it may be wise to consider refinancing through HARP.
Lower Monthly Payment
For many people, the best benefit to this program is the lower interest rate – which will translate into a lower monthly payment. You can also benefit from a lower payment if you extend the terms of the loan longer.
Fixed Rate Loan
The Home Affordable program also allows you to lock in a fixed interest rate for the life of the loan. If you currently have an adjustable rate loan (ARM), this option could help you to maintain the same payment for the life of the loan.
Who Qualifies for the Program?
Individuals with an existing loan that is owned or guaranteed by Fannie Mae or Freddie Mac may benefit from this program. You must still be an eligible borrower. This means you must still have a steady income and the ability to repay your debt. Also, the program requires individuals to be up to date on their mortgage payments. You must not have been 30 days late in the last six months. And, over the course of the last 12 months, you cannot be 30 days late more than one time.
Another key aspect for qualification of this program is having low equity. Equity builds over time as you make payments on your home loan. But, when your home’s value falls instead of rises, this can make it impossible to build equity. A key reason for HARP is to help people with low equity to get out from under these difficult loans. To qualify, your home must have limited equity. Or, your current loan – which must be your first mortgage – is higher than what your home is worth right now.
There are a few other requirements for obtaining help with the Home Affordable Refinance Plan:
- Your home must be your primary residence, second home, or an investment property.
- Over the last few years, the home’s value must be lower. For example, from when you obtained the loan, the home’s value must be higher than it is now.
- Your loan must have closed on May 31, 2009, or prior to this time period.
The Home Affordable Refinance Plan may be right for you if you can continue to make payments on your home loan, but you want to pay less for the purchase. For many people, there is no other opportunity to refinance because of the value of the home and lack of equity.
What Makes HARP Different?
Unlike other programs to allow you to refinance the loan, the HARP mortgage refinance opportunity offers a few key benefits:
- You may qualify even if your home’s value is lower than what you owe on the existing loan.
- You most often do not have to pay for an appraisal of the home – which is a requirement for most other types of refinancing.
- Generally speaking, closing costs are typically lower than other loans. Most states also allow you to roll over those costs into the home loan you obtain.
- You can use it to benefit you in a variety of ways – lower monthly payments, lower interest rates, and even extending the length of the loan (or shortening it).
- You are not automatically disqualified if your income is lower now than it was when you obtained the loan.
For all of these reasons, individuals who are in a mortgage and paying too much to buy their home may wish to consider the value of HARP. The entire process is straightforward and designed to help you obtain better terms without high costs. For those with a home loan like this, refinance it means saving money on their purchase.