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How could HARP be better option than conv mortgage if we have a 2nd mortgage?

The lender we are working with told us we were approved for a conventional refinance at 4.86% that would consolidate our 1st and 2nd mortgages, but then said that she had asked someone else in the mortgage dept to give us a call because they thought that we would be better off refinancing with HARP? From what I understand of HARP, this would mean that the 2nd mortgage would NOT be able to be included in the refi??? If that is true, then I'm not seeing how this could possibly be a better option for us. Our 1st mortgage is $270,000 at 6.125%. Our 2nd mortgage is at $80,000 and over 7%. The appraisal the bank did came back at $385,000 My last check on our credit scores (about 3 months ago) we were between 685 and 700 with 0 late payments Not understanding HARP other than what I've gleaned from the Internet this morning, I just can't see how this could be a better option for us? Any advice would be appreciated. I am also wondering if 4.86% is a reasonable rate for our situation. Thanks!
  • March 22 2012 - Carroll
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Answers (2)

Profile picture for GMerino

The lender that you are working with was hoping that the appraisal would come back higher because my guess is that you took out the second mortgage after you bought the home.  If that is the case the maximum LTV would be 85%.  If that is not the case you should be able to combine the two loans because the loan now is a rate/term refinance.  The maximum LTV is 97%. In this case the HARP program would be best for you considering if your loan is a rate/term refinance because now the loan would require mortgage insurance.  Ask a few lenders what rates are for a HARP loan here. 

  • March 22 2012
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Hello,

In response to your question, the rate of 4.86% that you are being quoted most likely takes into consideration the second mortgage being rolled in with the first.  Based on the numbers you listed it appears the new LTV% (loan to value) will be just over 90%.  The new loan amount will be at/or around $350,000, and divided by the value of $385,000 is how the LTV% is calculated.  You should clarify the EXACT LTV% with your lender because this will affect the rate.  Also, you want to be sure there is NO PMI; the new loan exceeds 80% of the value.  The HARP program would be a good solution if you planned on subordinating the second and had a value problem.  In your case a standard conventional is the way to go.
  • March 22 2012
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