Update: HARP expires December 31, 2018.
Do you owe more on your home than it’s worth? If you’ve been keeping up with your payment and riding out the storm, there’s relief in sight. However, the opportunity to get this relief won’t last forever.
The Home Affordable Refinance Program (HARP) was put in place by the Obama administration after the crash of the housing market. Its goal is to allow homeowners that can’t refinance under other programs because of low equity to take advantage of today’s much lower rates by finally getting into a new loan.
If you’re going to take advantage of this, now is the time to do it. HARP is expiring at the end of 2016. Let’s go over the program requirements so you can get started.
While this program is very helpful, there are some specific guidelines for qualification that homeowners need to know about before they move forward:
- The mortgage must be owned by Fannie Mae or Freddie Mac and sold to them before May 31, 2009
- The loan-to-value (LTV) – the ratio of the outstanding balance on the house compared to the home’s value – has to be between 80% – 200%
- You have to be current on your mortgage. You can only have one late payment in the last 12 months and none in the six months prior to refinancing
- You can only refinance under HARP once unless you previously refinanced a Fannie Mae loan between March and May 2009
If you’re interested, you can use this tool to help check your eligibility.
Why Do It?
According to the most recent available data from HARP.gov, the average homeowner saves $179 per month on their payment. It’s also important to note that mortgage rates are still near historic lows so you have the potential to save money.
Let’s say you got your loan in 2008 and you paid one point in prepaid interest (equal to 1% of the loan amount). With those terms, you could expect an interest rate around 6% for a 30-year fixed mortgage. Today, you can easily get a rate at 4% or lower with minimal or no prepaid interest.
Just think of what you could do with the extra money you’d save on monthly payments. You can put extra away for retirement. Maybe you want to put aside more money for your child’s college fund.
I’m sure you could find something to spend the money on that’s better than interest. Who doesn’t like more money in their pocket?
If you’re going to take advantage of this program, you’d better hurry. HARP expires December 31, 2018.
Interested in HARP? Check out more details or get started. If you have any questions, we’ll be happy to answer them in the comments below.
If so, subscribe now for tips on home, money, and life delivered straight to your inbox.