As an increasing number of homeowners find themselves struggling to hold on to their homes, or just to keep up with mortgage payments, there has been more discussion about HARP refinance. HARP is an acronym which stands for Home Affordable Refinance Program. The program is meant to help homeowners refinance their property, even when they find themselves in the unenviable position of owing more on their mortgage than their home is worth.
During a housing boom, many new homeowners take on mortgages that allow them to make only interest payments, or other mortgages that have adjustable rates. As interest rates skyrocket, these payments become difficult to make, and as property values plummet, the principal loan amounts and interest rates begin to seem particularly burdensome.
The HARP refinance plan aims to resolve some of the issues caused by homeowners having risky mortgage products. Through HARP, homeowners can refinance with a fixed rate mortgage set at a low interest rate. A homeowner who currently has an interest only mortgage can switch to a fixed rate, more traditional mortgage and begin earning equity in their home. They may even get a lower monthly payment.
Homeowners with an adjustable rate mortgage can switch to a fixed rate mortgage and do away with surprising increases in their monthly mortgage payments. Many homeowners, who began their adjustable rate mortgages at a low interest rate, and with an accordingly low monthly payment, may have received a shock at some point when their payments suddenly doubled or even tripled in size. A fixed rate mortgage puts an end to such unpleasant shocks, making it easier to create and stick to a budget where the surprises are few and far between.
The HARP refinance plan may be advantageous for any homeowners, but it is especially so for those who do not otherwise qualify for a mortgage refinance. Homeowners who have a first and second mortgage on their home can utilize HARP to refinance their first mortgage only. The second mortgage will simply remain as it is.
Any homeowner who owes more than their house is worth, has a mortgage with interest rates higher than the currently prevailing rates, has an adjustable rate mortgage, or are not eligible for the typical refinance loan, may qualify for HARP. This program can be tremendously valuable to homeowners, assisting them to hold on to their home and keep current with their mortgage payments.