A remortgage is often used as a solution to help relieve debt, by changing the interest rate or the amount of time required to pay off the mortgage. Remortgaging (also known as refinancing) pays off the initial mortgage with proceeds of the new mortgage secured against the same property.

Even though the interest rates of mortgages are at their lowest levels for the past few decades, many mortgages are not being refinanced. Many borrowers are unable to refinance because of bad credit. Bad credit remortgages are difficult to come by, as the industry is seeing an increased need for regulation, as we have seen Fannie Mae and Freddie Mac placed in government conservatorships. In the current economic downturn and foreclosure crisis, we see many homeowners, who make full, on-time payments, owing more on their houses than the houses are worth. We used to think people in this category were financially irresponsible, but now there is a whole class of people who are “underwater” due to a combination of unforeseen financial crises.

HARP (Home Affordable Refinance Program) was designed for consumers whose mortgages are owned or guaranteed by Fannie Mae or Freddie Mac. You are eligible if you have a 1-4 unit home, have made payments on time for the past 12 months, and owe no more than 125% of the value of your home on the first mortgage.

Tips for working with HARP:

1. Don’t expect the process to run smoothly. It has taken some homeowners six months from application to closing to obtain a HARP refinance.

2. Keep detailed electronic records of all documents. Send emails with attachments and require a receipt when the email has been viewed. If someone claims not to have seen a document, you will have proof.

3. When you are comparing HARP refinances, provide all lenders the same information to be able to compare quotes efficiently.

4. If you are applying to HARP searching for a bad credit remortgage, make sure that you have made timely payments on your house as this is one of the primary qualifications for the program.

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Filed under: Debt Recovery • Mortgages

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