Home values have slowly begun to recover much of the equity lost in the last decade while at the same time mortgage rates are still very near historic lows. We pointed out yesterday that a 30 year mortgage rate for an investment property was near 4.00% and even lower with a 15 year term. But for investors who own properties that haven’t yet recovered all their value, they couldn’t take advantage of these rates because there was no equity in the transaction. Historically there needs to be at least a 20% equity position when refinancing a residential rental property. That is until the introduction and later modification of the Home Affordable Refinance Program, or HARP.

 

HARP was first introduced by Congress in 2009 and modified in 2012 to help property owners refinance to a lower fixed rate regardless of any current market value. In fact, under the HARP program, there is no requirement for an appraisal whatsoever. That means an investor can own a duplex valued at $100,000 with an outstanding mortgage balance of $150,000. Because there is no appraisal requirement and the loan is being refinanced to a lower fixed rate, a refinance is possible.

There are some basic requirements and while they’re relatively simple they absolutely must be met:

·         The current loan must be owned by Fannie Mae or Freddie Mac. Both have sections on their sites where real estate investors can see if any of their outstanding loans are owned by Fannie or Freddie.

·         The loan must be originally dated prior to June 1, 2009.

·         There can be no payments made more than 30a days past the due date within the past six months and no more than one such payment within the previous year.

This programs is set to expire at the end of this year and while there is still time to refinance a mortgage on a rental property the Fed has started to raise rates having done so at their December FOMC meetings. Rates are still competitive, but if you haven’t refinanced your rental property because you didn’t think there was enough value, you can with a HARP loan.