HARP Loan Pros and Cons

harp loan pros and cons

HARP Loan Pros and Cons

What is HARP?

HARP was designed in 2009 to help homeowners refinance when finding themselves under water on their mortgages. Given, the HARP Loan pros and cons are good to know.

HARP is an abbreviation for the Home Affordable Refinance Program. Unlike the Home Affordable Modification Program, or HAMP,  which helps homeowners face foreclosure, HARP helps homeowners who have current mortgage payments but cannot refinance because of dropping home prices.

The United States housing bubble popped in 2008, leaving millions of borrowers in the wake of tumultuous tides. Homeowners at this time found themselves with homes worth less than their actual mortgage. Therefore, HARP was formed to allow those homeowners with a loan-to-value ratio reaching beyond 80%, to be able to qualify for refinancing.

HARP Loan Pros and Cons

When it comes to financial issues, it is very easy to get confused. It is common to not have a complete understanding of everything that is included with a HARP loan, so let’s have a look at the HARP loan pros and cons of taking on this kind of loan.


A major plus of the HARP program is that the actual value of your home is not a qualifying factor in your refinancing process. This is highly advantageous for the millions of homeowners who would otherwise find themselves unable to refinance due to their newly devalued properties.

People with second mortgages can also easily qualify for assistance under the HARP program. Under this type of qualification there are certain specifications that must be met to qualify for this specific refinance program.

  1. Must be current on mortgage payments without any missed or late payments within the last 6 months.
  2. You are not allowed more than one late mortgage payments for one year prior to your application.

Under the HARP program, a good credit score could mean a zero-cost refinance. You also won’t be faulted for qualifying and making lesser payments under the HARP contract.

Additionally, there are no appraisal costs or on-site appraisers to deal with. This process can be completed via an automated system.

As mentioned, it’s beneficial to have a basic understanding of the HARP loan pros and cons. Let’s take a look at some of the drawbacks of HARP.


If you have credit issues, including reaching your credit limit, you might not ascertain the ideal terms you are looking to get. This is especially true if you have high balances on your card or current loans. In these cases, it is likely that your lender might not end up agreeing to any new terms.

Another problem many have with HARP is that the program does not decrease the principal balance. In all actuality, it makes the principal balance even larger.

Another standout is that you cannot payoff/refinance a fixed-rate second loan, or home equity loan through the HARP program. A second lender will rarely find this situation to be a good fit.

You also cannot qualify for HARP if you have used it to refinance prior.

The bottom line

Programs like HARP are designed to help homeowners that find themselves with a huge mortgage relative to their home value.

While this loan is a great solution for some, it’s beneficial to know the HARP loan pros and cons before taking further action. Familiarize yourself with the process, and take action when necessary.

Today, you can compare the best rates for HARP Loans for Up to 125% Loan to Value.

Not sure if you’re eligible for HARP?

Verify Your HARP Refinance Eligibility Here!