What Home Refinancing Options to Choose?


The process of substituting the original mortgage with a new one is defined as refinancing. Usually, homeowners decide to refinance their mortgages in order to get better terms or lower interest rates. The option of home refinancing is especially good for people with good credit history. However, for borrowers with bad rating or highly indebted, such a decision will be pretty risky. Yet, the options of home refinancing can vary.

HARP as an option for underwater loans

In many cases, especially after the recent global financial crisis, homeowners turn to home refinancing because their loans exceeds their market value (so-called underwater loans). HARP, the Federal Home Affordable Refinance Program, allows the borrowers with good credit history and with loans varying from 105% up to 125% of their home’s value to apply for this program.

However, there are some drawbacks in this option. First of all, this option is available only for borrowers with underwater loans. As well, HARP requires good credit history and takes into consideration many factors.

HAMP for borrowers with bad credit history

HAMP (or the Federal Home Affordable Modification Program) was created for underwater mortgages with missed payments in the past. In order to apply for such mortgage, you should display financial difficulties that put your mortgage in high risk of default. Yet, many experts draw attention to the fact that it is rather not a refinancing program, but a change to the terms of contracts.

Programs of banks

Some borrowers cannot apply to the two above-mentioned programs. However, many banks offer their own programs, aimed to ease the burden of high debt or unbearable terms. Try to research the market and find the best options for you. Banks can offer various programs, beginning from conventional refinance programs and finishing with special programs for small loans (up to $200,000, for example). The programs like streamline refinance allow you to get an approval for the mortgage with lower interest rates faster.

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