Preparing for the End of a Mortgage Forbearance
Let’s explore what you need to know about the end of your mortgage forbearance.
As people were still getting use to the COVID-19 virus, the CARES Act helped provide some major benefits. One of which was providing coverage for homes against natural disasters, which includes Covid-19 pandemic.
The New York Federal Reserve (NYFR) found that by May 2020, 7% of all US mortgage accounts were in forbearance. This indicated that American homeowners who wanted to put off their mortgage payments until they were more certain of how things would go.
It turns out the use of forbearance agreements hasn’t been as strong as originally thought. By June 2020 there were more consumers exiting than entering into an agreement, according to research by the New York Federal. As of March 2021, that figure is 4.2%
One troubling aspect is that homeowners who are currently in forbearance (and there are quite a lot of them) do not seem well positioned to bounce back once their forbearance expires. Per that New York Fed study, the households taking advantage on the extended forbearance period are more likely to:
Live in lower-income areas
Be first-time homebuyers
Be one or more months past due on their mortgage payments
So what should these homeowners do in order to prepare for when their forbearance ends?
Plan your post-forbearance budget
It’s crucial that you understand what your financial situation will be like once your forbearance ends. It is important to try to prepare for the end of your forbearance by considering all the things that may happen and how it will affect you and your family. The closer the date gets, the more likely it becomes that there will be some high-stress levels.
It may be necessary to discuss with your lender about taking out a loan via refinancing to help ease the burden of your monthly payment. If so, there are steps you can also take to get current on your mortgage payments. These involve selling off other assets or creating another income stream.
Consider refinancing your loan
Depending on your loan status and credit score you can consider a mortgage refinancing. Even if you’re in forbearance, you might be eligible for refinancing. Having at least three consecutive payments may qualify you to apply for refinancing.
Keep in mind that refinancing your mortgage can extend your repayment and come with additional costs. But if you want to stay in the house and the post-forbearance mortgage payments won’t work for you, it may be the best option.
Selling your home
If you’re struggling to keep up with your mortgage repayments, you’ll want to think about selling your home. Downsizing or renting could give you a chance to save money and get back on track financially.
Home prices are rising. This is bad for home buyers, but great for people that want to sell their homes. It may provide a potential solution if you’re not optimistic about your post-forbearance future.
Consult a housing specialist or financial advisor
If you’re looking for advice on how to get out of your current mortgage, there’s no better place to go than a HUD-certified housing counselor. These expert professionals can provide you with the guidance and information you need to make this transition.
These experts can help you review your options and get you started on the best path for you, your home, and your financial stability.