The Home Affordable Refinance Program or HARP was introduced in 2009 to stimulate a troubled economy. It gives homeowners who had defaulted on their mortgage payment an opportunity to get a refinance. The original HARP was not a great success, and hence a modified version was launched in 2012. The new version is called HARP 2.0. This has been much more successful. Still there are tens of thousands of homeowners who have not yet been able to get a refinance.
HARP allows homeowners to get an altogether new and usually more affordable mortgage. Since the HARP program doesn’t require an appraisal, it is a great option for all homeowners who suspect that they are underwater on their mortgage.
Under the HARP program, you will be able to receive refinance even if the money you owe on your home loan is higher than the current value of your property. This will benefit several homeowners because home values had plummeted during the recession. Borrowers who already have a second home loan on the same property can also get refinance through HARP.
While buying a home, the buyer will have to contribute at least 15% of the value of the property as down payment. The lending institution will provide the rest of the amount. Homeowners, who don’t have sufficient funds to make a large down payment, sometimes get a second loan on the same house. This second mortgage is also called piggyback mortgage.
When you have another mortgage on the same house, you will need to make monthly payments on two loans. In all likelihood the first mortgage will be much bigger than your second mortgage. Remember that when you have 2 mortgages for the same home, only the first mortgage will be eligible for receiving refinance through HARP. You have to use the funds that you receive through HARP to pay off your first mortgage. It cannot be used to pay off your second mortgage.
Interested in getting a refinance? There are quite a few things you need to know. Several lending institutions offer refinance, but not all refinancing plans are the same.
Some banks that claim to offer refinance don’t do it. These institutions merely act as brokers. As far as possible, try to get refinance from a company that specializes in it. Also, don’t forget to compare the interest rates and closing fees to ensure that the new mortgage is worth your money and time.
Is refinancing better than short sale?
Home prices have appreciated in recent times. The economy is also beginning to show signs of a recovery. Homeowners who have enough equity in their home should definitely consider getting a refinance because it is much better than attempting a short sale. But remember that refinancing will be beneficial only if you plan to live in the house for a long term.
Another thing that you should consider is the interest rate. If you can’t get a much lower interest rate than your current rate, there is no point in getting a refinance, especially when you consider the fact that banks charge closing costs. People who intend to move out in a couple of years are also unlikely to benefit from HARP Refinance.