Saving Money with the Home Affordable Refinance Program (HARP)

The Home Affordable Refinancing Program, or HARP, is a government program designed to provide relief to homeowners who have high-interest rate mortgages or who are underwater on their mortgage. Those who qualify are given the opportunity to refinance their mortgage on more favorable terms.

Getting Started

The purchase of a home is a major, long-term financial commitment. Over the decades that a mortgage can sometimes last, circumstances can change. Homeowners may face a decline in their personal financial situation, interest rates may become more or less favorable, or the value of their home may decline due to market trends.

The Making Home Affordable Program was established by the federal government to provide relief to those homeowners who are suffering the consequences of adverse financial markets and other circumstances. Part of this program was the establishment of HARP, which was designed to help homeowners who are current on their mortgage payments but are afflicted with a high-interest rate mortgage or a decline in the value of their home.

Below is a brief overview of the HARP program.

Program Benefits

The main benefit of HARP loans is that they are frequently made to borrowers who would not otherwise be eligible for a refinance.

Eligibility for Upside Down Loans:Loans that are "underwater", meaning the outstanding loan balance is in excess of the home's value, are usually not eligible for refinancing. Borrowers who find themselves in this situation may be good candidates for HARP, however. The program targets borrowers who have a loan-value ratio in excess of 80%. This is good news for a lot of people who have witnessed their home value collapse in spite of still owing a lot of money.

Fixed Interest Rates:Variable-rate mortgages were popular prior to the last financial crisis, but for many, these loans have proven expensive and unpredictable. HARP allows variable-rate borrowers to refinance at a fixed rate.

Lower Monthly Payments:A lower interest rate will result in a lower mortgage payment, all other things equal. The benefit of this is obvious.

Faster Payoffs:If a borrower refinances at a lower rate, but keeps paying the same dollar amount each month, they will pay off the loan faster than they otherwise would.

Borrowing Power: With HARP, qualifying homeowners can borrow up to 200% of their home's value.

Minimal Fees or Out-of-Pocket Expense: The cost of refinancing with HARP is minimal. In many cases, there are no closing costs.

Flexibility: There are two options for proving financial ability: You can provide evidence of income or evidence of having cash on hand for one year's worth of mortgage payments.

No Appraisal or Underwriting: There is no appraisal or underwriting for HARP loans, meaning the process is completed very quickly.


Current on Payments: The program is not designed for those who are behind on their mortgage payments. A perfect or near-perfect payment record for the past twelve months is a requirement.

Your existing mortgage must be owned by Fannie Mae or Freddie Mac. If you are uncertain about this, inquire with your mortgage company.

Eligible properties are primary residences, 1-unit second homes, or 1- to 4- unit investment properties.

Your existing mortgage must have taken effect prior to May 31, 2009.

Steps to Applying

1. Gather Financial Information: This may be the most time-consuming part of the process, but keep in mind how the effort can pay off in the form of saving money on your mortgage.

2. Determine Your Eligibility: Review the requirements listed in this article and see if you conform to the guidelines.

3. Meet with a Professional: A licensed mortgage broker can help walk you through and submit your application.

4. Apply, wait for approval, and close your new loan.


HARP has many benefits, but it can't fix all mortgage problems. If you are facing a short sale or are behind on your payments, HARP will likely not work for you. HARP also cannot reduce or renegotiate the principal owed on your home.

If you do qualify, however, HARP can be a great way to improve your mortgage situation. With a quick and simple application process, the possibility of lowering your interest rate, and ultimately saving money, there's nothing not to like.

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