Is HARP Refinance a Cash-Out Mortgage Program

by Sandra from Boise ID, by Joe from Shady Side MD, by Anthony from Barnegat NJ

Ask Kate if HARP refinance is a cash-out mortgage program: Sandra asks if she can use a HARP refi as a cash-out mortgage program to pay off $15,000 in credit card debt. But first, I address the amount of equity in her home as it relates to the HARP program eligibility requirements.

In the comment section near the end of this page, you'll meet Joe and Anthony. Joe wonders which would be more beneficial: HARP refinance or another HAMP modification. Anthony asks about help for homeowners with a 'regular' mortgage who are still having a hard time affording their homes.

Ask Kate: HARP Refinance and Paying Off Credit Card Debt

By Sandra C from Boise ID

Is HARP Refinance a Cash-Out Mortgage Program
Hi Kate, I qualify for HARP refinance.

My question is, I have 15k in credit card debt. I would love to pay that debt off. Would I be able to wrap the 15k into the refi? Is that possible?

Or would indeed another type of mortgage loan program be better at that?

The home is worth $190,000 and my pay-off balance is $117,000. I so appreciate your weekly updates. You are a gem!

Sandra ~ Boise ID

***zz-portrait-left.shtml*** Kate's Answer: HARP Refinance and Paying Off Credit Card Debt

Hi Sandra,

Thank you for your kind words. I am happy to know you enjoy Ask Kate!

HARP refinancing is primarily for homes with negative equity. Negative equity occurs when a home is financed for more than its current appraised value. However, homeowners with 0 to 20 percent equity are also eligible. See HARP Refi Loans for eligibility requirements and underwriting guidelines.

HARP Refinance Program and Loan-to-Value (LTV)

For example, if a home is valued at $200,000 and is financed for $162,000, its loan-to-value (LTV) is 81 percent, which equals 19 percent in equity. This means the 1st mortgage is eligible for HARP consideration in regard to LTV and equity.

To estimate your home's LTV, divide the mortgage pay-off by the appraised value. See more about LTV at Should I Refinance My Home to Get Rid of Private Mortgage Insurance (PMI).

So I am a little perplexed that you've been approved for HARP since you appear to have more than 20 percent equity, based on the figures you provided. But don't let that discourage you since I can't possibly know your entire situation. However, it may be worth a call to your mortgage originator for clarification.

HARP and 2nd Mortgage Liens

However, it could be that you have a 2nd and even a 3rd mortgage attached to your home which pushes your LTV over 80 percent. If you have these additional mortgage liens on your home, you will want to read HARP Refinance Program Made Impossible and HARP 2 Refinances with 2nd Mortgages to prepare for the inevitable loan subordination.

HARP vs Cash-Out Refinance

The HARP program only allows 1st mortgages to be paid off in the refinance. There are no allowances for paying off credit card debt. Another common hiccup for borrowers considering HARP involves 2nd and 3rd mortgage liens.

Alternatives to HARP Refi

Does the amount of equity in your home prevent you from participating in HARP? Is not being able to pay off your credit card debt a deal breaker? Than an alternative would be a mortgage refinancing program, one that allows cash-out to pay off consumer debt. Go here to read about Cash-Out Mortgage Refinance Programs: How to Avoid the Woes.

Don't Dilly Dally If You're Interested in HARP Refinance

The sun isn't setting on the HAMP modification and HARP refinance programs quite yet. But the programs are slated to end soon. Read more at HAMP and HARP Program Extensions.

Best wishes,


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HAMP Modification or HARP Refinance
by: Joe C from Shady Side, MD

I have a HAMP modification loan that has been paid as agreed. It is in the 7th year, next year the interest will go to 5 percent and then to 5.3 percent. Are there going to be anymore perks to this program or should I try to go to a different mortgage program?

Hi Joe, Kate here...

I have no knowledge of upcoming improvements to the HAMP program. However as it stands now (July 2016), both of the Making Home Affordable HAMP and HARP programs are set to expire at the end of this year. So why not call your loan servicer to see if you are eligible for a second HAMP modification with lower payments? Read more at HAMP Tier 2 Modifications Offer Hope.

Or since you are in the 7th year of HAMP, your credit may have improved enough to make you eligible for HARP refinance. Read about the program benefits at HARP 2 Loan Announcement: Guidelines and Eligibility Requirements.

Best wishes, Kate

Refinancing My Mortgage that's Neither Fannie Mae nor Freddie Mac
by: Anthony from Barnegat, NJ

Hi Kate, Have they ever come out with help for regular mortgage home owners who are still having a hard time keeping up with their payments and can't find someone to help them?

Hi Anthony, Kate here...

While it's true that HARP refinance is only for mortgages that are backed by Fannie Mae and Freddie Mac, HAMP modification does not share in that restriction. However, your lender must have agreed to participate in the program. Fortunately, many lenders have.

But if you discover that your lender does not participate in HAMP, FHA mortgage loans might hold some promise for you. Here are tips for finding an FHA Lender to originate your refinance.

Best wishes, Kate

Click here to add your own comment.

You can also ask Kate about your mortgage at Refinancing Advice The Nuts and Bolts.

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