The Home Affordable Refinance Program (HARP) was launched in 2009 with the objective of stimulating the economy by giving refinance to homeowners who have been underwater with their mortgage. It was not hugely successful, so it was modified and re-launched in 2012 as HARP 2.0. Of course, HARP 2.0 has been more successful than its predecessor. Still, there are millions of home owners who have not been able to refinance their home and take advantage of lower rates.
HARP refinance loans are designed to help homeowners get a new, more affordable, and more stable mortgage. The best thing about the HARP program is that it does not require an appraisal so if you suspect you are underwater on your loan; this is definitely an option you need to consider. Just don’t forget to compare the rates and fees to see if the new loan is worth your time and money.
HARP allows you to get refinance even if the value of your home is lower than the amount you owe on your loan. Homeowners who have a second mortgage can also benefit from this program.
What is a second mortgage?
Home buyers, who don’t have the money to make large down payments, sometimes get another mortgage at the same time that they buy the home. This second mortgage is often called piggyback mortgage. If you have a piggyback mortgage, you will have to pay on two mortgages for one home. In most cases, the first mortgage is much larger than the second mortgage.
If you have two mortgages for one home, it is important to realize that only the first mortgage is eligible for refinance through HARP.
Homeowners who are eligible to receive refinance through HARP will use those funds to pay off their existing first mortgage. It is important to remember that they cannot use their HARP refinance to pay off their second mortgage.
If you are you interested in getting a HARP refinance, here are a few points to keep in mind:
Not all HARP lenders are the same. They aren’t equal either.
Many banking institutions who claim to offer HARP refinance don’t do it. They merely act as a broker between the borrower and the lender. This is not exactly bad; however, it is always better to deal with the lender rather than the broker because the broker doesn’t have any real control over the loan application. Ultimately it is the lender that decides the terms and the conditions.
Refinance vs. short sale
In many areas, property prices have appreciated significantly in the last few years. And now that the economy is on the road to recovery, many homeowners who were once in deep trouble are close to break-even.
This recent appreciation in the value of homes makes HARP refinance a much better option than a short sale. However, before rushing to refinance your home, you need to remember that a home refinance option is beneficial only if you intend to stay in that home for a long time or if you can get a significantly low interest rate. Don’t jump on refinancing just because you want to get a lower rate than your neighbor.
Home Loan Advisor can analyze your property, current market conditions, local market comps, and other variables in our proprietary algorithm as well as match you with potential lenders! To assist you in the refinancing process, you can get a free home value report from Neighborhood IQ and find out what your home is really worth.