The Fed recently stated that, when unemployment falls below 6.5%, home financing rates are going to start going up again. What that means is, if you’ve been contemplating refinancing your home, now is probably a good time to do it.
That being the case, you definitely need to look into the Home Affordable Refinancing Plan, or HARP. HARP is a program created by the federal government a number of years ago that allows American homeowners to save quite a bit of money on refinancing in spite of the major decline in home values in the last few years.
Using HARP, homeowners can refinance their homes at rates that are surprisingly low and, in most cases, reduce their monthly mortgage payments significantly. Last year for example, the average savings was about 33% which, on a mortgage loan of $200,000, equals just north of $4100 in a year in savings. Using the program nearly 40% of American homeowners were also able to shorten the length of their mortgage loans at the same time.
HARP started in 2009 and is set to expire at the end of this year, in December 2015. That leaves American homeowners just under 12 months to take advantage of this plan and its excellent features. There is one caveat however, and that’s the fact that you must be current on your mortgage payments in order to use the program.
It was put into place because the government wanted to keep homeowners from having to foreclose on their mortgage, and the program allows them to do this by lowering their mortgage to more palatable and affordable levels. Banks aren’t exactly happy with the program because it allows homeowners to pick and choose among lenders, and doesn’t limit them to the rates their current lender offers. It also helps homeowners who have a loan-to-value home that’s less than 125% and doesn’t require them to take out private mortgage insurance.
The benefit to homeowners is obvious, including the ability to refinance their home even if the value has dropped significantly. With an average monthly savings of approximately $350, HARP is definitely a program that you should take advantage of if you’re considering refinancing, but do it fast because, as we mentioned, it’s going to expire in less than 12 months.