Editor’s Note: The HARP program expired December 31, 2018. The Freddie Mac Enhanced Relief Refinance (FMERR) loan program has become a popular replacement options.
Additionally, Fannie Mae’s High LTV Refinance Option (HLRO) currently has no expiration date. Similar to HARP and FMERR, it’s a great loan option for underwater homeowners who don’t have enough equity earned in their home to qualify for a refinance.
The most recent report from the Federal Housing Finance Agency (FHFA) states that investment property owners have used the HARP 2.0 refinance program over 430,000 times to reduce payments and increase cash flow on their rental homes. The FHFA’s August 2015 report reveals that about one in seven HARP loans were used for investment properties since the program’s inception.
HARP 2.0 helps homeowners refinance into a lower payment, even when they owe more on the loan than their home is worth. But according to data from the CFPB, many real estate investors have not taken advantage of HARP for their rental properties. There were over 1 million rentals purchased between 2007 and 2009 that may be HARP eligible, yet less than half of these homes have been refinanced into a lower rate with HARP.
The 30-year fixed rate mortgage averaged 6.19% during those pre-HARP years according to Freddie Mac, and even higher for investment properties. With HARP investment rates today in the low to mid four percent range, many real estate investors could cut their mortgage payments by hundreds per month, increasing profitability and cash flow from their properties.
Refinancing a Rental with HARP 2.0
The HARP process for investment properties is similar to that of any refinance. The homeowner finds a lender with a good rate and fee combination. The lender need not be the same one that originally opened the loan.
Lenders may impose their own rules when it comes to refinancing a rental with HARP. Applicants should call around to find a lender that will take the loan. Click here to receive a HARP-alternative rate quote now.
After finding a lender, borrowers need to gather their documentation as directed by the loan officer, such as paystubs, W2s, and bank statements.
In addition, some extra documentation is needed for investment property refinances, such as
- A current lease agreement.
- Past 2 years’ tax returns.
- Enough income to cover any monthly loss on the rental.
- Extra assets in reserve as a precaution in case you lose your renter.
HARP Refinance Investment Property Requirements
To be eligible for any HARP loan, the current mortgage must be owned by Fannie Mae or Freddie Mac. These companies have a loan lookup website that will help determine whether they own the loan.
Other requirements are:
- The current loan must have been sold to Fannie Mae or Freddie Mac by May 31, 2009.
- The loan amount must be more than 80% of the home’s current value.
- No mortgage payments that were more than 30 days late in the last six months.
- HARP is not available on the same property twice.
HARP Refinances when a Second Mortgage is on the Property
Investment properties with second mortgages may still be eligible for HARP.
The HARP lender will request a subordination from your current second mortgage lender. The subordination is a required document that places the existing second mortgage in lower priority than the new HARP loan.
Applicants should call their second mortgage lender ahead of time and ask about their subordination procedures and policies.
Additional Benefits of HARP 2.0 for Investment Properties
The HARP program allows many situations that many of today’s rental property owners find themselves in. Here are a few examples of HARP benefits:
- Applicants who don’t have mortgage insurance won’t need it for the new HARP loan.
- Borrowers can wrap most or all closing costs into the new loan.
- Refinances for 2-, 3-, or 4-unit rental properties are available.
- A HARP refinance may be approved even when a primary residence was later converted to a rental.
HARP helps Investors Save Money and Increase Cash Flow
The HARP program has helped real estate investors s save money on 400,000 investment properties to date. There is no other program on the market that allows underwater rental property owners take advantage of recent low rates. Increase cash flow and save money each month with a HARP investment property refinance.