Do you have a mortgage? Do you owe more money on that mortgage than the actual property is worth? If you answered yes to both of these questions, you are in the same boat as I am. I bought my condo in April of 2008 as an investment (HAHA), and never thought things would get as bad as they are. I had a 6.5% interest rate on the loan, and have wanted to refinance for years. I was unable to do so because I was upside down (lingo for owing more than its worth).
Then there was HARP
The government came up with a program called the Home Affordable Refinance Program, or HARP. This program allowed homeowners to refinance their loans if their Loan to Value, or LTV was 105%. That means if you have a mortgage for $100,000, you could refinance a loan up to $105,000. HARP had stipulations of course, but was a step in the right direction for anyone that was upside down. Unfortunately, my LTV at this point was around 110%. That meant I couldnâ€™t refinance under HARP.
HARP updated, 125% LTV
Eventually, the government moved the LTV limitation up to 125% in order to entice more people to refinance. At this point, I was around 130% LTV. Condos were hit extremely hard and I had lost around 40% of the value of my condo in less than 3 years.
Finally a chance to refinance and lower my rate!!! In November of 2011, the government announced that they were taking away the LTV limitation on the HARP program. This is the break I had been waiting for. The value of my condo is still around 133% LTV, but with the removal of the LTV cap, I can finally refinance.
It looks like I will be refinancing at a 4.875% rate. Refinancing under HARP increases the rate, and the LTV also affects what rate you get. Once the refinance is finished, I will save around $130 a month. It will take around 18 months in order to make up the costs to refinance.
In the end, I am happy I can finally refinance and lower my rate. I am upset that I jumped into buying my condo instead of waiting. I was 21 years old, and couldnâ€™t wait to have a place. Life is full of lessons, and every mistake is a lesson learned. I am thankful that I have a home, a job, and can now save a little more money!