The Federal Housing Finance Agency announced the extension of the Home Affordable Refinance Program, or HARP, through the end of 2015. HARP is one of two government programs aimed at helping homeowners who are current on their mortgage — but have little to no equity — refinance their mortgage into a lower interest rate.
Are you eligible?
To see if you may qualify for a HARP refinance, ask yourself the following questions:
- Am I up to date on my mortgage? If no, you are not eligible to refinance via HARP.
- Have I made one late payment in the past six months? Have I made more than one 30-day late payment in the past 7-12 months? If yes, you are not eligible to refinance via HARP at this time. But the good news is that with time, this can be corrected by making on-time payments, which may make you eligible.
- Does Fannie Mae or Freddie Mac back my mortgage? If yes, you may qualify. Most mortgages are backed by organizations such as Fannie Mae, Freddie Mac and the FHA. These organizations insure the owner of the mortgage in case the mortgagor — you — defaults on payments. You do not write your mortgage check to the mortgage backer. Click the appropriate link to find out if your loan is owned or guaranteed by Fannie Mae or Freddie Mac.
- Did I take out my current loan prior to June 1, 2009? If yes, you may be eligible. Your loan must have actually been sold by the lender to Fannie Mae or Freddie Mac before June 1, 2009, but you’ll have to check with your current servicer to find that out. If you took out your loan after June 1, 2009, you are automatically ineligible.
- Is my current loan for less than $417,000? If yes, you may be eligible. But, there are some areas such as Los Angeles and New York City where this limit is set at $625,500. If you are unsure of your loan balance and whether you are eligible, check with your servicer.
If after asking yourself those questions you think you may be eligible, shop around for the most competitive mortgage rates and fees. Make sure to check with your current servicer and Zillow Mortgage Marketplace, the only comparison shopping site for HARP loans for underwater borrowers.
How much could you save?
To give you an idea of how much you could save by refinancing, take a look at this example using the refinance calculator:
Judy and Steve bought their home near the peak of the real estate market in mid-2008. They took out a loan for $320,000 at 6.5 percent and have a current loan balance of $300,000. Their current principal and interest payment is just shy of $1,896.
By refinancing their current loan balance into a 30-year fixed mortgage at 3.5 percent, Judy and Steve’s principal and interest payments would fall to about $1,347 per month, lowering their monthly payment by nearly $550 or 29 percent. They would save $83,393 over the life of the loan.
But, if Judy and Steve don’t mind the higher payment but want to pay off their home loan sooner, they could refinance into a 15-year fixed loan at 2.5 percent. Their loan payment would go up by $100 per month, but they would be done with their mortgage 10 years earlier than they would if they were not to refinance. The would save $208,793 over the life of the loan.
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