Getting started!
Getting started!
Getting started!
Getting started!
by Maurie Backman | January 21, 2021
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Millions of Americans have encountered financial difficulties during the coronavirus pandemic. The good news is that homeowners have received mortgage forbearance relief. Forbearance allows borrowers to suspend their monthly payments to their mortgage lenders without being reported late or charging late fees.
During the pandemic, homeowners had the right to seek indulgence for up to 360 days. There are currently an estimated 2.74 million homeowners whose mortgages fall into this category, according to Black Knight. But in the months to come, many of these borrowers will inevitably get out of indulgence. That means they have to start making up on their missed payments. If you find yourself in this situation, here are some things you need to know.
You ultimately need to make up for the mortgage payments that you skipped while your loan was in indulgence. However, you don’t have to do this through a single lump sum payment. Rather, you have time to catch up. However, the details will depend on your lender. If you are unsure of what your repayment schedule looks like, please contact us for clarity.
Unfortunately, your grace period may expire before you can financially get to a better place. If so, speak to your lender. There are several ways that you can lower your mortgage payments. For example, you may be able to refinance at a lower mortgage rate, or you may have the option to modify your loan. With the loan modification, you are not applying for a new mortgage as with refinancing – you are simply changing the terms of your existing loan.
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If you are not feeling better financially after ending the indulgence, consider selling your home. It’s not an easy decision, but you may be able to find a cheaper place to live until you are back on your feet. Property values have risen significantly over the past year due to a surge in buyer demand due to low mortgage rates and limited housing stocks.
If you decide to sell your home, you may be able to get a high enough sale price to pay off your mortgage and walk away clean . However, if you can’t sell your home at a price high enough to pay back your mortgage, you may need to consider other options. For example, you could speak to your lender about a short sale. In the case of a short sale, your lender will accept a price that doesn’t cover your existing home loan and write off the rest of your outstanding amount. A short sale is not ideal as it is listed on your credit report and lenders may not be willing to agree. But it’s a better option than falling behind on your mortgage and risking foreclosure.
Although forbearance rates fell from previous levels in early 2021, 5.2% of all mortgages are still in forbearance. If you’re part of these statistics, make sure you are prepared for what happens once your home loan payments come due.
Chances are, interest rates won’t stay at decades lows for long . Because of this, it is critical today to take action, whether you are looking to refinance and cut your mortgage payment, or are ready to pull the trigger to buy a new home.
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Maurie Backman is a personal finance writer covering everything from savings to retirement to healthcare. Her articles have been published in major outlets such as CNBC, MSN and Yahoo.
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