Insurance Quality:Shorter Terms Recommended for Harp 2

Many borrowers are stepping up and taking advantage of low mortgage rates by refinancing with the latest Harp 2.0 program. This program’s popularity is soaring as underwater borrowers look at it as a last hope to lower mortgage payments. In some cases, with shorter terms being recommended for Harp 2.0 refinances, borrowers will find themselves paying off their mortgage at a faster pace. The Federal Housing Finance Agency (FHFA) encourages underwater borrowers to shorten the term of their mortgage through the Harp 2.0 program while there is the opportunity to do so. With a shorter term, borrowers will pay down the amount that is owed much faster than with a 30 year mortgage. With mortgage interest rates on shorter terms lower than traditional 30 year mortgage rates, the lower interest gives borrowers the opportunity to reduce the length of the mortgage without much of a change in the monthly mortgage payment. Sometimes, borrowers can even realize a lower monthly payment if the original mortgage rate was significantly higher. In addition, the borrower will build equity in the property faster which will strengthen their own financial position. Since the property value is currently below the mortgage amount, the amount that is owed will drop to the property value amount in a shorter period of time which is a major benefit for borrowers who are able to take advantage of this opportunity. In addition, because faster payment of principal reduces the credit risk to Fannie Mae and Freddie Mac, there are no additional fees when borrowers make the choice for a shorter term. Current 15 year fixed mortgage rates are at 3.000% as compared with 30 year fixed mortgage rates which are at 3.750%, both available with 0.7 to 1% origination fee. Quotes for mortgage rates, such as these, can be obtained right online. While any of the available mortgage terms chosen with Harp 2.0 will be beneficial for the borrower, a shorter term may have a stronger impact which is why FHFA is recommending shorter terms for Harp 2.0 refinances. FreeRateUpdate.com surveys more than two dozen wholesale and direct lenders’ rate sheets to determine the most accurate mortgage rates available to well qualified consumers at a standard 0.7 to 1% point origination fee.