If you’ve seen your home’s value decrease over recent years OR if you owe more than the value on your loan then a ‘Home Affordable Refinance Program’ (HARP) loan could be a great option for you. The HARP mortgage may allow homeowners to take advantage of today’s low interest rates, in spite of their less than ideal equity position. However, there are a few unique requirements which must be met to do so:
THE ‘HARP’ MORTGAGE EXPLAINED
- Your existing mortgage must be held (currently) by either Fannie Mae or Freddie Mac. Even though you may make your monthly payments to a specific bank, either Fannie Mae or Freddie Mac may still actually ‘hold’ your loan. We can easily verify this information for you
- Your potential HARP loan home must be your primary residence, a single-family 2nd home, or a 1-4 unit investment property
- You purchased, or Closed, your current mortgage prior to May 31, 2009
- You cannot have any 30+ day late payments in the last 12 months
- Your ‘loan-to-value ratio’ must be over 80 %
If you are able to meet these basic requirements, you may be able to take advantage of the HARP program benefits to lower your rate and save some money now, instead of waiting for your home values to increase sometime in the future. Each borrowers financial position is unique and other specific requirements may be needed; Canyons Mortgage will know how to identify any such needs.
What is My Loan-to-Value Ratio?
Loan-to-Value ratio = The amount you owe on your home divided by the appraised value of your home.
Example 1: If you owe $ 160,000 and your home is appraised at $ 200,000, you have an 80% ratio. Example 2: If your mortgage is ‘upside down’, you may have numbers which look more like this – Your home appraises at $200,000, but you still owe $240,000 on your loan. In this example, your loan-to-value ratio is 120 %. A ratio over 80 % threshold will allow you to apply for a HARP loan.
Potential Advantages of a HARP Mortgage
YOU CAN LOWER YOUR INTEREST RATES & MONTHLY PAYMENTS
A lower interest rate lowers your monthly payments. Even a 1% interest rate reduction may lower your annual interest by several thousand dollars, which directly translates into lower monthly payments as well.
YOU CAN HAVE A SHORTER LOAN TERM
A shorter loan term won’t lower your monthly payments, however, it allows you to pay off your mortgage more quickly and get rid of those extra monthly payments.
YOU CAN CHANGE YOU ‘VARIABLE RATE LOAN’ TO A ‘FIXED RATE LOAN’
A HARP mortgage allows you to switch from a variable interest rate to a fixed interest rate, potentially heading off a balloon payment or ever increasing monthly payments. A variable rate changes periodically, and that may make your monthly payments very unpredictable! Switching to a fixed rate, you will enjoy the same monthly payments every month for the entire length of your loan.
