Don't miss your HARP opportunity

Posted by  on Jan 22, 2015

What has the government done for you lately? Sometimes that depends on whether or not you take advantage of what is available.

With the Home Affordable Refinance Program (HARP) entering its final year, the Federal Housing Finance Agency (FHFA) is actively reaching out to homeowners to encourage those in a position to benefit to refinance via the program. With HARP scheduled to expire on December 31, 2015, the clock is already ticking, but an even greater sense of urgency should stem from the fact that mortgage rates can change at any time.

HARP bails out underwater mortgages

HARP is a system by which the government backs certain refinance loans in order to allow people who owe more than their homes are worth to refinance. According to the FHFA, more than 3.2 million people have refinanced through the program already, but they estimate that more than 700,000 additional homeowners are in a position to benefit from HARP but have not done so.

One of the yardsticks that the FHFA uses to gauge whether or not people are likely to benefit by refinancing through HARP is if their existing mortgage rate is more than 1.5 percent above today's market rate. With current mortgage rates at around 4 percent, if you got your mortgage prior to 2009, chances are you could save more than 1.5 percent by refinancing. Crucially, though, that depends on mortgage rates staying as low as they are now.

Refinance rates: Opportunity knocks twice

Thirty-year mortgage rates bottomed out around the end of 2012, and then rose throughout most of 2013, ending the year at 4.46 percent. This was more than a full percentage point higher than they had begun the year 2013 -- and with the economy heating up and the Fed no longer intervening to drive mortgage rates lower, it was presumed this was the end of super-low mortgage rates.

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A funny thing happened in 2014, though -- mortgage rates started falling again, eventually dipping back below 4 percent late in the year. For those who have not yet refinanced, this could be a case of opportunity knocking twice -- and that's a second chance that should not be ignored.

Choosing a mortgage refinance loan

If you would like to pursue the possibility of refinancing, take the following steps:

  1. Check on your HARP eligibility. Go to the HARP website to see if you meet their requirements.
  2. Decide on a mortgage term. Generally speaking, it makes sense to match a refinance mortgage as closely as possible with the remaining length of your existing mortgage, and remember, the shorter a term you pick, the less interest you will pay. However, if you are having trouble fitting your current mortgage payments into your budget, it might make sense to use a longer mortgage to lower your monthly payments.
  3. Compare mortgage rates from different lenders. HARP is a government program which is available through private lenders. Shop around to find out which lenders are offering the most attractive rates, and then get competing mortgage quotes to see what rates would apply to your situation.

Some homeowners never get a chance to refinance. Thanks to HARP and the latest dip in mortgage rates, something like 700,000 more homeowners are getting a second shot at it. That is too good a money-saving opportunity to ignore.

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