Mortgage rates are still lower than they’ve been throughout most of the time analysts have bothered to track them. However, most of the time, in order to refinance and take advantage of lower rates, you have to have a certain amount of equity in your home.
You gain equity when you make payments, but the other big determining factor for this is the value of your house. If your home’s value has gone down since you purchased it or last refinanced, it’s possible you owe more on your mortgage than the home is worth.
That was the situation many homeowners found themselves in after the last major downturn in the housing market in the late 2000s. In response, the Home Affordable Refinance Program (HARP) was created to help homeowners with little to no equity refinance into lower rates.
If eligible homeowners haven’t taken advantage yet, they should note that the program officially ends on December 31, 2018.
Hasn’t HARP Been Around a While?
Making its debut in 2009, HARP has helped millions of homeowners refinance when they might not otherwise be able to, but the Federal Housing Finance Agency (FHFA) said there were more than 49,000 eligible mortgage holders who hadn’t taken advantage of HARP as of March 31. This was the most recent date for which data was available. HARP has helped nearly 3.5 million households.1
If you’ve been waiting, now is the time to make your move.
It’s a great time to refinance into a low rate, but before you take advantage of HARP, there are a few key restrictions you need to know about:
- Fannie Mae or Freddie Mac must own your mortgage.
- The loan has to have been sold to Fannie Mae or Freddie Mac prior to May 31, 2009.
- The loan-to-value (LTV) ratio, which is a comparison of your loan balance to the actual market value of your home, has to be higher than 80% in many cases. There’s often no upper limit to what you owe in order to refinance, but in some cases, Quicken Loans requires that you owe no more than double your home value on your mortgage. Speak with a Home Loan Expert about the best option for you.
- You have to be current on your mortgage payments. For the purposes of this program, that means having no more than one late payment in the last year and none in the last six months prior to closing your refinance.
- You’re generally limited to refinancing once under HARP. The lone exception to this is if you refinanced a Fannie Mae loan through HARP between March and May 2009. If that’s the case, you might be able to refinance a second time through the program.
It’s worth noting that it’s become easier to qualify for this particular loan option over the years, so if you’ve been denied in the past, it might be worth trying again. Additionally, in certain instances, no appraisal is required. Finally, there may be less documentation needed to assess your qualifications.
If these qualifications sound like a match to you, you can check your eligibility here.
Even if you don’t qualify for HARP, we may have other options to lower your payment based on your financial situation.
How Much Could You Save?
We’re telling you that you could save money, but how much are we really talking about here? That’s a fair question. Let’s dig into the numbers with an example.
Let’s say you last bought or refinanced your home in April 2009. Rates at the time hovered around the low 5% range. On a $200,000 home, if your rate was 5.125% on a 30-year mortgage and you refinanced today to a rate of 4.875%, you would save $30 per month. You would also save just over $11,000 in mortgage interest over the life of the loan.
If you’d like to try this comparison with your own numbers, you can check out our amortization calculator.
If you’d like to look into your options to refinance to lower your payment through HARP or any other program, you can get started online or contact one of our Home Loan Experts at (888) 980-6716. Time runs out December 31!
1 As of April 2018, more than 3.4 million households had refinanced using HARP, according to the Federal Housing Finance Agency refinance report, April 2018.
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