Monday, 12 September 2016
The financial crisis took a whack at housing prices, leaving many to watch their home's value plummet to less than what they owed on it. It's been a long recovery time, and some homes are still considered "underwater."
Fortunately HARP, the government's Home Affordable Refinance Program, can help homeowners refinance their mortgages—even if they owe more than the home's market value. HARP is based on market rates, and the program expires on Dec. 31, 2016.
Jens Lovell, executive vice president, Mortgage Lending at BBVA Compass, says most HARP-eligible customers know who they are. "If you're upside-down on your home because you purchased it pre-2009," says Lovell, "you've got an outlet through HARP."
Current eligibility requirements include:
In the past, HARP applications were difficult and required great details. Thankfully, a retooling of the program called HARP 2.0, has made it simpler. To apply, you'll need to provide:
When you successfully refinance a typical 30-year loan with HARP, you'll have lower monthly payments. But there's a way to pay even less on interest by converting to a shorter-term loan. According to HARP, a homeowner who currently owes $200,000 with an interest rate of 6.5 percent is paying a monthly payment of $1,264. If the house is worth $160,000, the homeowner has a current loan-to-value (LTV) ratio of 125 percent.
30-year loan scenario: If this borrower refinanced into a 30-year fixed-rate mortgage with an interest rate of 4.5 percent, the monthly payment would decline to $1,013. But by refinancing into a 30-year loan, the borrower's loan balance will not reach $160,000 for ten years.
20-year loan scenario: If the borrower chose a 20-year loan term at a rate of 4.25 percent (mortgage rates tend to be less for shorter term mortgages), the monthly payment would be $1,238 ($26 less than the borrower currently pays) and the borrower's loan balance would reach $160,000 in 5.5 years.
15-year loan scenario: If this same borrower refinanced into a 15-year mortgage assuming an interest rate of 3.75 percent, the monthly payment would be $1,454 ($190 more than the current payment), but the loan balance would be below $160,000 in about 3.5 years.
Apply for a refinance as you normally would, through a bank or mortgage broker. You can compare your good faith estimate and truth in lending estimate, and compare those to your current terms to make sure it's an improvement.
How do you know if you should refinance your mortgage and what is the best way to do it? Find everything you need to know to make a decision.
Whether you're planning to sell your home or just want to enjoy it more, these are the top five inexpensive ways to freshen things up.