If you have been struggling to pay your mortgage, then mortgage forbearance might be the solution for you. Nevertheless, it’s not the only solution.
In fact, the total amount of loans in forbearance has decreased by 2 basis points from the 4% of servicer portfolio volume in a single week in June of this year. That’s a vivid statistic.
The good news? There are options when this period ends, and your mortgage will need to be paid in full! That’s what this article is about.
Keep reading to discover your options and how you can utilize them.
What Is Mortgage Forbearance?
A forbearance is a temporary suspension of payments on your mortgage that lasts from three months up to twelve months. This period can be extended if extenuating circumstances such as medical emergencies or unemployment exist, but the total amount you repay cannot exceed twelve months.
If an agreement for this type of repayment plan has been made with your lender, they will determine how much and when you need to pay until the end of the forbearance term. In fact, this is a critical aspect of mortgage forbearance and it cannot be dismissed.
What Happens When Your Forbearance Period Ends?
When the forbearance period ends, you will need to repay all your mortgage payments in full. If this is not possible for some reason (for example, if high unemployment rates continue), then an extension can be granted by contacting your lender before the end date.
However, keep in mind that it may result in additional interest charges depending on how long the loan was suspended. It would be wise to look into other options as well.
What Are My Options?
If making monthly payments becomes difficult after a hardship. For instance, due to medical emergencies or employment changes. However, repayment is now required, contact your lender directly.
Some lenders allow up to 24 months to catch up with missed payments without any penalty fees added to what you already owe.
You also have the option of refinancing your mortgage. It could provide you with a lower interest rate and monthly payment, but it may require that you pay closing costs.
You might want to consider this if you think you will be in the home for a long time or if you believe interest rates will drop even more in the future.
Contact a HUD-approved housing counselor for additional assistance if you cannot keep up with your current mortgage payments. They can provide you with other viable solutions and may help you work out an agreement with your lender.
Keep in mind that a foreclosure is always an option. However, it should be considered a last resort and only after speaking with a housing counselor or lawyer.
Should You Sell Your House Instead?
Many people wonder if they would be better off selling their home instead of paying someone else’s mortgage, but many factors are to consider. Remember that you will need to pay for realtor fees and closing costs. Not to mention repairs or updates necessary before selling the house again.
If your house is underwater (meaning more money is owed than what it is worth), this option might not even make financial sense. This is because you could end up losing several thousand dollars besides having no place to live!
Mortgage forbearance extension enables homeowners who have experienced hardship—unemployment or medical emergencies temporary suspension of payments.
This is, so they do not lose their homes too quickly during these tough economic times. Market forbearance agreements can last from three to twelve months, and in some cases, an extension can be granted.
One must make payments in full at the end of the forbearance term. If this is not possible, contact your lender before the end date to discuss other options. Remember that foreclosure is always an option, but it should be considered a last resort.
You also have the option of refinancing your mortgage if you think you will be in the home for a long time or if interest rates will drop even more in the future.
How a Forbearance Exit Can Impact Housing Supply
A potential concern with the end of forbearance agreements is that it could impact the housing supply. With homeowners having more difficulty keeping up with their payments, especially if they are underwater on their mortgages (meaning what they owe exceeds the value of their home), this could lead to even more foreclosures in an already depressed market.
Furthermore, the impact of the housing supply may also affect rental prices. Since many homeowners cannot sell their property, they might decide that renting is a better option for them while trying to get back on track financially.
This could lead to more vacancies in otherwise occupied rentals. This is because the owners cannot afford the mortgages alone or choose not to sell due to market conditions.
Your Housing Issues Taken Care Of
If you are experiencing difficulties making your mortgage payments, contact your lender immediately.
Many options are available to help get back on track, such as mortgage forbearance agreements or refinancing. Remember that a foreclosure is always an option, but it should last.
Selling your home may also be an option, but there are many factors to consider before making a decision. HUD-approved housing counselors can provide additional assistance if needed.
If you’re interested in selling your home, get in touch with us now, and we will happily accommodate your needs.