Avoid Mortgage Insurance with The HARP Refinance Program

Should I refinance my current mortgage or use a loan modification program?

Does this sound familiar? You bought a home or refinanced within the last few years and now that mortgage rates are low you would love to refinance your existing mortgage loan into a new low fixed mortgage rate and reduce your monthly mortgage payment. But when you inquired about refinancing, you were told that the value of your home had dropped to the point where your new loan would be more than 80% of the current value of your home. That means you would need mortgage insurance and the cost of your monthly mortgage insurance premium is more than you would save from refinancing. To top it off, you even have a second mortgage that actually makes your combined loan-to-value more than 100% of the current value of your home.

If that describes your current situation, there is a new refinance program offered that could help. The only catch is that you need to have a loan that is owned by Fannie Mae or Freddie Mac. If your loan is currently owned by either mortgage agency, then you can participate in the Home Affordable Refinance Program, known as HARP.

Find out who owns your home loan

To find out if your loan is owned by either agency, you can either contact your loan servicer and ask or you can go directly to the Fannie Mae web site or the Freddie Mac web site and there are instructions on the home pages for checking each.

If your loan is owned by Fannie Mae and you do not have mortgage insurance currently, you can refinance your existing first mortgage with a regular 30 year fixed rate even if your new loan amount is up to 105% of the current value of your home. Starting October 1, 2009, the Fannie Mae HARP program will actually allow loan amounts up to 125% of the value of your home.

HARP Availability

Most people believe that this program is only available if you are underwater and owe more than your home is worth, but the program is available to all borrowers at any loan-to-value below that maximum. By using HARP, you can refinance to avoid mortgage insurance.

HARP Example

For example, if your loan amount is $200,000 and your original value of $250,000 has dropped down to $215,000, your loan-to-value when you refinance will be 93%. Normally, that would mean you would be stuck with mortgage insurance. Even worse, if you have a credit score between 620 and 680, you may not be able to even get mortgage insurance and if even if you can the mortgage insurance monthly premium will be much higher than any savings you get from refinancing.

But the with HARP program, you can refinance that $200,000 loan and even get a higher loan amount to cover closing costs as long as your loan amount is less than 105% (and shortly 125%) of the current appraised value of your home). And you will not have to have mortgage insurance even though your loan is higher than 80% of your home value. While the mortgage interest rate is slightly higher than conventional 30 year fixed rate loans, the lower your loan-to-value is below 105%, the closer your rate is to regular fixed rates.

HARP and Fannie Mae Loans

If you have a Fannie Mae loan and you DO have mortgage insurance, you can also participate in the HARP program but you will be stuck with the mortgage insurance you have and you can only refinance with your existing loan servicer (although you can work with a mortgage banker or broker who will refinance your loan and send it back to your existing servicer; oddly, you can sometimes get a better deal this way).

HARP and Freddy Mac Loans

The Freddie Mac program is not as easy: you can only refinance with your existing loan service although like with Fannie Mae you can also work with a mortgage broker or banker and they can send it back to your existing loan servicer. However, they also allow the same new limits as Fannie Mae.

For both programs, the other program feature is that you can have a second mortgage for any amount and as long as that second mortgage hold will re-subordinate their loan (see: "Refinancing When You Have a First and Second Mortgage," then you can refinance your first mortgage under the HARP program.

The FHA refinance program currently allows refinances up to 95% of the current value of your home and just recently also allows secondary financing up to any amount.

For an exact refinance rate quote from one of America's fastest-growing mortgage bankers, complete a free rate quote request now!.

To see the current mortgage rates, visit our Current Mortgage Rates page.

If you have any questions that you would like to get answered by our expert mortgage brokers, please email us or call us at 1-877-868-2503.

Our visitors also found the following articles relevent to this topic:

• Mortgage Refinancing FAQs
• Refinance Mortgage Loan
• Four Common Types of Refinance Mortgages