3 Steps You Should Take If Your Mortgage Is About To Break Forbearance
Many homeowners have faced their share of financial hardship during the coronavirus pandemic. Fortunately, there was one option available for those who were having trouble making their mortgage payments – forbearance.
Under the CARES Act, the massive coronavirus relief bill that was enacted at the start of the pandemic, any homeowner facing financial difficulties could go into forbearance. Under forbearance, mortgage payments could be suspended for up to 18 months.
Since many homeowners put their mortgages on forbearance in the spring of 2020, over the next few months many of these loans will have to come out of forborne. If your mortgage falls into this category, here are three essential steps to take.
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1. Find out if you can start making your monthly payments
Your personal finances may have improved in the past 15 months. Or maybe they didn’t. Either way, take a look at your budget and see if you can defer your mortgage payments after the forbearance period is over. You better know this information now than wait for your payments to come due and then realizing you can’t do them.
2. Ask your loan manager for a mortgage modification
Are you worried that you won’t be able to keep up with your mortgage once your loan goes out of forbearance? If so, it might be a good time to talk to your loan officer about a mortgage loan modification, which involves changing the terms of your home loan.
Your loan manager may agree to extend your repayment term so that you have more time to pay off your home, making each monthly payment lower and easier to manage. Or, there may be another arrangement your loan officer can come up with, so it’s worth having that conversation.
3. See if it pays to move
Home values â€‹â€‹have increased dramatically nationwide to the point that your home could be worth a lot more now than it was when you started withholding. You might have the option of selling your home for a profit or breaking even and walking away with a clean slate. At that point, you could rent a house for a while or buy a cheaper house.
Remember, your credit score won’t suffer when you sell a home. However, it will go down if you short sell (when your mortgage lender accepts a selling price for your home that doesn’t cover your entire mortgage balance) or if you get foreclosed. So, before you decide to move out of your home, see what its market value looks like and compare it to what you owe on your mortgage.
Many borrowers will be running out of time on the forbearance clock this fall. If you are one of them, now is the time to anticipate this situation and make sure that you are equipped to deal with it. And if you don’t think you can start paying off your mortgage again, be sure to explore your options as soon as possible.