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Forbearance is ending, and lenders are going to start asking for their money again. Though it was a nice reprieve from mortgage payments, it was never going to last forever. So what do you do now if you’re still struggling to pay your bills?
Just A Little More Time!
Forbearance helped a lot of people during the pandemic as jobs closed and paychecks ran thin. As the economy continues to recover from the hectic past year, it may be necessary for some homeowners to stretch their payment reprieve a bit longer. If that’s the case, there are a few things you can do to get a little extra time to collect your dough.
On Thursday, the Federal Housing Finance Agency announced that borrowers could extend their payment pause for another three months. This could mean a total of 18 months of payment forbearance throughout the pandemic, a sizeable chunk of time to get finances in order. However, the deadline for that extension is fast approaching. Borrowers only have until June 30 to apply.
The extension is under the CARES Act and only applies to mortgages backed by Fannie Mae or Freddie Mac. Originally only intended as a 360-day pause, Biden has officially instated a potential extension for many borrowers who need a bit of extra time. The President also banned foreclosures on homes with federally-backed mortgages through June 30, originally set to end in January and then in March.
How Do I Extend?
Good question! The first thing you need to do is communicate with your lender. Instead of tossing mortgage reminders in the trash, be upfront with your lenders, letting them know that when forbearance ends, you may not be in the financial state to pay the money back. They don’t want to foreclose on your house. So it’s important to utilize these methods to ensure you keep your home.
Request an extension, especially if you’re only in your first period of forbearance. Speak to your lender and request extra time. If you don’t, they’ll have no choice but to move to the next step in the process, which could reflect poorly on your credit score.
Remember: forbearance was just a pause in your payments. You still need to pay all that money back, whether it be in a lump sum payment, a short-term repayment plan, or a loan modification that changes how much you owe each month on your mortgage, adjusted for the payments you missed during forbearance.
Find another living situation if the current one is too expensive for your current financial condition. This is going to be a lot more beneficial than forcing the lender to foreclose on your home. It’s a win-win for both parties, so listen close.
The housing market is doing very well. If you’ve been paying off your mortgage for a while, you probably have more equity than you think. Equity can go a long way, especially if you sell your home and use those funds to pay off the rest of your mortgage payments. There might even be enough to put a down payment on your next home.
Refinancing after forbearance ends might be the best financial decision. Locking in a lower interest rate and monthly payment can make the repayment process much easier. Interest rates could be much lower than they were when you first took out your mortgage, and refinancing can give you more breathing room as you begin to incur the added expense of paying off the past year’s mortgage payments.
There are plenty of ways to refinance your home, and though there is usually a waiting period to refinance after forbearance, the strange circumstances of the pandemic have rewired that mentality for many lenders.
For many lenders, you’ll have to have three months of consecutive mortgage payments before you can refinance, but if you qualify for a Streamline Refinance, you can skip those three months and start right away.
Ultimately, it will vary by lender. Make sure to ask the right questions when discussing your options with your financial institution.
Forbearance Ends, Now What?
If you still have time on your forbearance, or you qualify for an extension under the CARES Act (and your mortgage is backed by Fannie Mae and Freddie Mac), use that time to figure out your financial options. Whether you will proceed with increased payments or pay off what you’ve missed in one fell swoop, you should start figuring it out now.
Waiting until forbearance ends can slash your credit score and reflect poorly on you as a borrower. This can make it harder to find low-interest rates on future mortgages or other loans.
Do your research!
Not all private lenders are required by law to extend forbearance protection, but they’re willing to do so if you ask. Stay in touch with your loan provider now, because things are about to get hectic. Support centers are about to be swamped with questions and if you call too late, you may not reach a representative in time before your bills start piling up again.
Customer support callers need to be trained and lenders are likely not prepared for the volume of borrowers whose forbearance is about to run out. Be early and prevent stress. Call now and don’t be embarrassed to ask for help.