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If you’re “underwater” with your mortgage — that is, you owe more than your home is worth — you still have time to refinance under a government program that can cut your monthly payment.

But you have to weigh the potential savings against your likely costs.

HARP, or the Home Affordable Refinance Program, remains in effect through the end of 2018. It has helped more than 3 million underwater and low-equity homeowners reduce their mortgage payments since 2009.

The Federal Housing Finance Agency says more than 143,000 homeowners still could benefit from the program, which saves borrowers an average of $2,400 per year.

However, closing costs also can reach into the thousands of dollars.

“Borrowers get attracted to refis like moths to a flame,” says Ed Conarchy, an investment adviser and a banker at Cherry Creek Mortgage in Gurnee, Illinois. “They are attracted to that low rate, but sometimes they don’t see that’s only half of the story. You have to factor in the closing costs.”

Doing the math

Those with larger-dollar mortgages at interest rates well above 5 percent are more likely to see a net benefit from HARP refinances than homeowners in less expensive areas.

A borrower who refinances a relatively modest $125,000 loan that originally had a 6.5 percent interest rate will save $90.13 a month in mortgage payments through a refinanced loan carrying a 5.375 percent interest rate, according to Jim Sahnger, a mortgage loan originator at Schaffer Mortgage in Palm Beach Gardens, Florida.

That borrower will spend about $3,230 on closing costs, which will take about three years to recoup.

But another borrower who owes $375,000 would save $270.37 a month, under the same scenario. That borrower would make up the estimated closing costs of $3,915 in a little more than a year.

On this type of larger loan, it would make sense to consider the HARP refi, Sahnger says.

Conarchy says he has helped several borrowers who have refinanced through HARP. But in most of those cases, refinancing made sense only because the borrowers didn’t have to pay lender fees.

“If your (HARP) closing costs are $600 and you’re saving 100 bucks a month, that’s a slam-dunk,” he says. “In six months you’ll break even.”

Ways to reduce upfront costs

The chances you’ll pay only $600 for closing costs are low, especially in states where title fees are more expensive. But HARP does allow the lender to build your closing costs into the refinanced loan.

It’s worth asking your lender how the cost of a HARP refi compares to that of a traditional mortgage refinance, which might come with very competitive closing costs.

“In many cases traditional first mortgage refinances are being offered with no or low closing costs,” says Susan Verbeck, chief lending officer at Community First Credit Union of Florida. “This same benefit is generally not available on a HARP loan.”

Credit score and equity may affect refi costs

As with other types of refi loans, your HARP interest rate will be affected by your credit score and how the amount you borrow compares to the value of the property.

Lenders often will let you lower your interest rate by paying the fees known as “points” — but that may cost anywhere from a few hundred to a few thousand dollars extra at closing.

“There’s a lot of factors that come into play, so the best thing to do is ask for comparisons,” says Sahnger. “Show me what’s the cost to pay for the refinancing and anticipated return, and what’s it going to cost me over time.”

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