How To Refinance a Home With HARP
The Home Affordable Refinance Program (HARP) was created in 2009 in response to the poor housing market. If you own a home, but owe more than it is worth, it is virtually impossible to refinance the property with a typical lender. These types of mortgages were often abandoned before HARP came along.
With the revitalized HARP 2.0 in October 2011 helping even more homeowners today, it is crucial to speak to your lender about eligibility Utah HARP works by lowering your principal, the interest rate or other financial portions to save you several hundred dollars each month, depending on the property. This federal program is meant to help homeowners whose mortgages are greater than the market-value of their homes through most major banks if they hold a Freddie Mac or Fannie Mae loan.
If you are unsure of your loan's origination, call 866-442-2184 to speak to a HARP mortgage lender. The government wants you to remain in your home to keep the economy and local community thriving toward success. You are not confined to working with just your lender. With the government's support, you are able to compare different interest rates with various lenders before settling on a refinancing option.
Benefits Of A HARP Loan
Increased Financial Security
Once your loan is refinanced under HARP, the interest rate is typically lower and principal could be reduced. With each passing month, you decrease your debt and gain equity. Because your monthly payment is not as overwhelming as before, you have more financial security to put money into savings or toward the property's principal. You may find yourself a way out of this sort of unfortunate property situation and increasing overall property wealth.
Community Property Values
Many neighborhoods find their overall property values diminished by abandoned or rundown homes on each block. Through HARP financing, you and your neighbors can refinance and stay in your homes. With extra money available each month, everyone can improve their homes, such as adding a new coat of paint. Property values slowly rise with a caring community maintaining their homes. As property values increase, your equity grows into a lucrative investment.
Maximum LTV Thrown Out
HARP's initial launch did not help as many homeowners as it could because of its LTV limit. LTV, or loan-to-value, ratio is a comparison between your outstanding loan amount and current property value. Initially, the government set a limit at 125 percent. For example, a valued $100,000 property could only be refinanced for $125,000 under HARP 1.0. However, most homeowners had LTVs much higher than the maximum amount.
HARP 2.0 removed the LTV maximum, relieving homeowners and creating an influx of applications. There is a stipulation to the LTV maximum, however. HARP refinances homes with a fixed interest rate using the removed LTV ratio law. If you choose an adjustable loan, HARP only refinances if your LTV is under 105 percent. Adjustable rates are not often chosen by homeowners so this maximum has not been a concern.
Exorbitant fees associated with refinancing a property rivaled a new home purchase. Several thousand dollars typically exchanged hands just to change or transfer a home loan. HARP 2.0 reduces these closing costs and streamlines the refinancing process. For example, a full property appraisal is not required. HARP can use neighborhood estimates and historical calculations to approximate a value. Because of the removed maximum LTV, the value is not as critical as it was during HARP 1.0.
Second Home Relief
Investors felt the pain of the housing market with their second, or investment, properties. Because unemployment ran wild during the Great Recession, people could not afford the rent on an investor's second property. As a result, the investor had reduced income and struggled with his two mortgages. HARP 2.0 allows investors to refinance second properties along with their main residence. Keeping the housing market vibrant helps the community thrive and survive until unemployment subsides and economic promise kicks in.