Why Investment Property Owners in Utah should consider refinancing through HARP?
As most lenders continue to tighten mortgage requirements for investment properties, it has made it impossible for many owners to take advantage of historically low interest rates. As an investor myself, it pained me to continue to pay the mortgage on my rental property each month at a 6.5% interest rate knowing that interest rates were currently being offered for 4%. I don’t know any investor that couldn’t benefit from the increased cash flow by reducing the interest rate on his/her property by 1.5%. I continually tried to refinance, but due to the fact that I had purchased this property in 2007 and was underwater, no lender would even entertain refinancing my mortgage. Lucky for me a colleague of mine mentioned the possibility of refinancing through HARP.
As a property owner in Utah, you may be eligible for HARP, or the Home Affordable Refinance Plan. This was enacted in 2009 by the US government in order to allow home owners to refinance his/her rate in order to continue paying the mortgage each month and avoiding foreclosure. This was the perfect option for me, as it does not require the home to be owner-occupied and does not require an appraisal. Earlier this month, I was able to refinance my rental property from a 6.5% interest rate to 4% with closing costs totaling $500. In turn, the cash flow on my rental property went from break-even each month to $250 positive cash flow.
So what is required to qualify for HARP? First of all, your current loan must be backed by either Fannie Mae or Freddie Mac. Second of all, your current mortgage must have a securitization date prior to June 1, 2009. If these two criteria are met, you may be eligible to refinance your current mortgage through the HARP plan. Unfortunately, if your current mortgage is FHA or a jumbo loan, you will not be eligible for HARP.
So I am eligible for HAP, what do I do now? The first thing I would do is reach out to your current mortgage servicer and inquire as to the interest rate you would be eligible for with this program and the procedure to initiating this refinance. I would also reach to a few local mortgage brokers in order to determine if the interest rates they can secure are lower than the rate offered by my current mortgage servicer. It is also wise to determine the closing costs offered by each in order to determine your break-even point. Once you decide, be prepared for the process to take a significant amount of time. Lenders are receiving as many as 1,000 application per month with prospective owners wanting to participate in this program. From the time your application is submitted, the process may take 3-6 months. I will tell you though, that the savings can be well worth the wait.
If you would like more information regarding the HARP program or would like to have your rental property managed, please consider hiring FRE Property Management. We are the premier property management company in Utah and will provide you the peace of mind knowing that your investment will be taken care of. Contact us today at 673-5692.