How Do I Refinance if My Home is Underwater?
* There is an UPDATE to this Post here: President Obama’s New Refinance Program
This is a question that seems to be haunting homeowners recently. The Federal Reserve Board issued a report on Thursday September 22nd that may just answer this question or at least shed some light on the subject.
*If you owe more on your home than it is worth, don’t be alarmed, nearly 23% or, over 10,500,000 homeowners are in the same situation as you.
Interest rates on home mortgages are at their lowest point in history according to Freddie Mac they currently sit at a National Average of 4.09% for a 30 year fixed mortgage. Many people feel they can’t take advantage of these low mortgage rates because their home is underwater.
In 2009, in an effort to keep the home mortgage market open to as many homeowners as possible, the Federal Housing Finance Agency instituted a program called HARP.
HARP or Home Affordable Refinance Program is a program aimed at homeowners who are “underwater”, a common term for borrowers who owe more on their home than the home is worth.
The HARP Program allows borrowers who are underwater to refinance at market rates as long as the balance of the mortgage is not greater than 5% +/- over the market value of the home. Obviously the mortgage payment would need to be reduced by the refinance and your mortgage payment history must be good. Also, your loan must have been written prior to December, 2009.
There are certain other restrictions, for details please contact one of our mortgage professionals.
When the Federal Housing Finance Agency instituted the program they had expected the program to be a wild success. The FHFA Officials had expected that nearly 4,000,000 homeowners would take advantage of the program.
As of August 1, 2011 less than 840,000 underwater homeowners have taken advantage of HARP, this is causing the FHFA to review the program.
The difference between 840,000 and 4,000,000 is quite alarming, why aren’t more people taking advantage of the program? One reason for the disparity between the estimate and the actual is awareness for the program.
For instance, many homeowners who refinanced a while ago without PMI believe that they will now be required to have costly Mortgage Insurance added to their payment. This simply isn’t true, if you have no PMI now, you won’t need it under the HARP Program either.
All you can do is be sure that you aren’t left out, if you feel as though you may qualify for relief under HARP be sure to explore all of your refinancing options.
There are many intricacies to the program and we can help you work through them one by one.
We may have an option for you to refinance even if you’re home is underwater.