Making Home Affordable Refinance Program

The Real Deal with HARP

Attracted by the chance to decrease mortgage payments, plenty of homeowners take their chance in refinancing through HARP or Home Affordable Refinance Program. This program is created to make the refinancing process easier for homeowners who are experiencing financial challenges and do not have much equity for their homes. This federal program seems to be a wonderful opportunity, but all things considered, is it worth it?

Most borrowers who refinanced in the first half of 2010 saved around $125 to $150 on monthly mortgage payments says Freddie Mac. However, this is not a big amount in comparison to the thousands they spend on closing costs. The borrowers who greatly benefit from the HARP are those that acquired a large loan during the time when interest rates were at 6 to 8 percent. On the other hand, homeowners from the less expensive area may not get the same benefit.

In order to fully benefit from HARP, upfront costs must be reduced. But, this is not easy with expensive title fees in most states. Moreover, there is little chance to find a lender who can offer a refinance through HARP without collecting other fees. In fact, if ever lenders will waive upfront fees, they will most likely compensate for this by charging higher interest rates. In addition, they can include closing costs in the total payment of the refinanced loan. The problem with this is that it can affect a borrower’s eligibility for the program. This can influence the loan to value ratio of the mortgage.

HARP permits borrowers to refinance up to a maximum of 125% of the value of their homes. But, borrowers on borderline may be affected with the addition of closing costs in one’s loan amount. Despite the stipulated guidelines of the program, almost all lenders are not willing to offer refinancing for those borrowers with loans of more than 105% of their property’s value.

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