Our current economic climate has set many Americans back. With millions out of work, individuals have turned to unemployment due to their diminished source of income.
Thankfully, those struggling have received relief from the CARES Act, as well as other programs.
For those with mortgages backed by the federal government or supported enterprises, a 180-day forbearance has been granted.
But what happens when that time runs out? We have the answers. Read further to see what your next steps are.
Understanding forbearance
Forbearance is not to be confused with deferment. When your mortgage is deferred, it typically does not gain interest. At the end of your deferment period, you continue making your monthly payments as usual and those missed payments are tacked onto the end of your loan term.
With mortgage forbearance, you may have to pay your missed mortgage payments as a lump sum after the pause period. Oh, and your loan likely still gains interest as well.
Make clear with your lender what terms and conditions were decided upon when you made your agreement.
Extend your forbearance
If you are unable to continue making your mortgage payments as usual, the first step you should take is to contact your bank or lender and request an extension.
Do not wait until after your forbearance expires, contact your lender as soon as possible.
This is not unheard of, considering we still are not out of the woods yet regarding the pandemic.
According to the Consumer Financial Protection Bureau, if you were granted forbearance under the CARES Act, you are eligible to request a 180-day extension.
Refinance your mortgage
With today’s crazy low rates, you can refinance your mortgage to lower your monthly payment into a place where you can afford it.
Keep in mind that you do have to pay closing costs when refinancing a loan, but these could be rolled into your new mortgage depending on how much equity you have in your home.
Read more about refinancing and mistakes to avoid.
If you are not interested in going this route, there are some lenders who are willing to offer loan modifications during these difficult times.
Again, reach out to your lender and be honest about your financial situation. They want you to be able to pay them as well!
Sell your home
If you were not planning on staying in your current residence for much longer anyways, now is as good a time as any!
It is a seller’s market right now which means home sales are up, 44.3% percent in fact, according to the National Association of Realtors®.
Buyer demand is up due to low interest rates, and home values are steadily increasing. Despite uncertainty with our economic climate, buyer interest seems to be at an all time high.
These are ideal conditions for those wanting to list their home on the market today.
If you have enough equity built up in your home, you may just be able to pay off that pesky mortgage and put yourself into a more ideal living situation until things blow over.
