Updated in 2011, the Home Affordable Refinance Program (HARP) has been updated and improved to increase your ability as a homeowner to refinance. In fact, if the Loan-To-Value (LTV) ratio on your home is 125% or higher, there’s a good chance that you may be eligible to refinance for a lower interest rate and monthly payment through HARP 2.0.
In the midst of the housing crisis, HARP 1.0 was provided by the Federal Housing Finance Agency (FHFA) as part of President Obama’s Making Home Affordable Program. This program was meant to help borrowers blindsided by plummeting real estate values—but only if the LTV on their property was 125% or less. For borrowers in this category, the program was a success, lowering millions of Americans’ monthly payments.
As a result of this success, the FHFA upgraded HARP to HARP 2.0, redesigning it to include those with LTVs of over 125%. According to the latest count, upward of 2,566,000 loans have been refinanced through HARP; 316,000 of those were made possible through HARP 2.0.
So, how do you determine if your home’s value is less than the value of your mortgage? While this can be accomplished in a number of ways, it is most commonly done through:
- The value determined by an appraisal by a licensed appraiser
- The value determined via a lender’s estimates
- The amount that the home was purchased for—known also as the home’s actual value
Imagine, for instance, that you bought a property for $250,000 during the housing boom’s peak, financing the entire sale price of the home through Fannie Mae and at higher rates. Now imagine that the housing market collapsed and your home was suddenly worth a mere $130,000. Even after the recovery happens, your home will only be able to recover some of its prior value, rising to $200,000. At this point, you still owe $250,000, but your property is worth only $200,000—this puts your LTV at 153%. Under HARP 1.0, you would have been ineligible for the program’s benefits. But thanks to HARP 2.0, you can now refinance your mortgage to get lower rates and monthly payments.
Does your LTV match the LTV requirements for HARP 2.0? Fill out our quick 1-minute form to have a Mortgage Advisor contact you.