How to Refinance a Mortgage with No Equity

With HARP, you can refinance your home without any equity.

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The options for refinancing your home when you have no equity are limited, but they do exist. The key is to be current on your mortgage payments, as delinquent homeowners' chances for a successful refinance without equity are less than slim and close to none. While a conventional mortgage refinance without having at least 20 percent equity is probably impossible, the Home Affordable Refinance Program (HARP), offered by both Fannie Mae and Freddie Mac, can make a refinance happen.

Fannie Mae and Freddie Mac Mortgages

To qualify for the HARP program, your mortgage must be owned by the Federal National Mortgage Association, known as Fannie Mae, or the Federal Home Loan Mortgage Corporation, or Freddie Mac. Furthermore, your mortgage must have been purchased by Fannie Mae or Freddie Mac on or before May 31, 2009. To be eligible, you must not have refinanced your home under HARP previously, unless you did so under the former HARP program between March and May 2009.

Current Loan-to-Value Number

To qualify for HARP, your current loan-to-value number must be more than 80 percent. Because the program is designed to help homeowners with limited or no equity, it's not designed to help borrowers with loans below 80 percent of a home's value. Even if your loan-to-value exceeds 100 percent, you might be eligible, as HARP permits refinances with loan-to-values up to 125 percent. Thus, homeowners who are "under water," with a home value less than their mortgage balance, are still eligible to refinance.

Mortgage Status

HARP is not a program to bail out delinquent homeowners. Your mortgage must be current when you apply to refinance. You must also have no more than one 30-day late payment in the prior 12 months. If your mortgage is still in its first year, you must have made all payments on time when you refinance. However, if past payment problems are over, and you have a good payment record in the past year, you should still qualify, regardless of your lack of equity.

Assessing Eligibility

Learn if your current mortgage is owned or guaranteed by Fannie Mae or Freddie Mac. They both offer online loan look-up tools to help you get this information. Talk to the lender servicing your current mortgage loan to learn what they offer. Also contact other Fannie Mae- or Freddie Mac-approved lenders to learn about their HARP offers. Shop for the best deal. Evaluate the rates and terms you find to select the best option for you. If you qualify, apply for the refinance right away to avoid damaging rate increases.


Be sure to ask your current mortgage servicer if it participates in HARP. Because not all lenders and servicers are participants, save time by learning whether you even have access to HARP terms. If you become overwhelmed or confused, you can contact Freddie Mac and Fannie Mae directly for help and advice. Understand that the HARP program is scheduled to expire at the end of 2013, so don't delay in applying if you qualify.