Here’s something new about the HARP refinancing program we haven’t heard before. The Home Affordable Refinance Program is the one that might let you “refi” if your loan is “seasoned” and you owe more than the home is worth.
Lots of folks like mortgage debt because they can write off mortgage interest expense on their taxes. However, get this, from attorney Herman Thordsen – about the tax implications of HARP:
“If the extension of credit may exceed the fair market value of the dwelling, the interest on the portion of the credit extension that is greater than the fair market value of the dwelling is not tax deductible for federal income tax purposes, and the consumer should consult a tax advisor for further information regarding the deductibility of interest and charges.” Good food for thought, although it will be interesting to see how mortgage servicing companies break that out on year-end statements.
Former clients have phoned wondering if their existing FHA loans will be ineligible for cancellation of mortgage insurance. Clarification from HUD says that new FHA loans – originated after June 3, 2013 – will pay the monthly mortgage insurance premium for “the first 30 years of the mortgage term, or the end of the mortgage term, whichever occurs first, for any mortgage involving an original principal obligation (excluding financed UFMIP) with an LTV greater than 90 percent.”
Since most people use FHA for maximum financing, the new “no cancellation” clause will include almost everybody new to the program. If you already have an FHA loan, you’re under the rules in effect when your loan started. In most cases, it’s that you pay mortgage insurance for at least the first five years, then you can petition to have it removed based on a new appraisal. There’s no guarantee it will be cancelled, but at least it’s worth a phone call to your loan service to ask.
Lastly the federal reverse mortgage program is beginning to tighten. Home Equity Conversion Mortgages are defaulting at a very high rate, as seniors fail to keep their property taxes current. Not paying property tax on time can trigger the “due” clause on reverse. Coming soon, seniors will need to income-qualify for the tax obligation as part of their reverse mortgage application. If this program has appealed to you, know that the feature of not qualifying except for age and equity may be changing soon.