One of the most challenging financial difficulties is to be hard on cash while you’re still paying for your home mortgage. With the global coronavirus pandemic raging on, millions of working-class, mostly mortgage-paying individuals, lost their jobs. If you’re one of those affected by the current crisis and having trouble making ends meet, you know that sooner or later, you’d be concerned about your mortgage payments or not being able to make them.
There are only several months that you’d be tolerated for not paying your mortgage before talk of a possible foreclosure is mentioned in a letter from your bank or loan provider. The latest data shows that one in every 12,448 homes across the entire United States is facing the same problem. Homes are selling fast through Burlington House Buyers and similar companies purchasing homes and offering immediate cash.
There’s Still Hope
Before you despair, you might want to know more about your options to avoid foreclosure. Remember that your home is still one of your best assets, and being in financial trouble during this pandemic doesn’t mean that you should just give the keys to the foreclosing bank and walk away. Read more about your options on how to avoid foreclosure:
- Ask About Moratoriums
Your first line of defence against foreclosure during this pandemic is a moratorium on payment. Most, if not all, government-backed home mortgage programs are covered by a moratorium on payments. It allows borrowers to postpone or suspend their home mortgage payments without being threatened with foreclosure or eviction. The suspension in place expired on January 31, 2021, but it was extended. Check the extension date affecting your mortgage program.
- Request Forbearance
Another option for you to avoid foreclosure without selling your house is to request forbearance of payments. This process means you, as the borrower and your bank or mortgage lender, agree to allow you to postpone your mortgage payments for now. They also pledge not to foreclose on your mortgage even though you haven’t made your payments for some time.
For mortgage loans covered by Fannie Mae and Freddie Mac, the moratoriums on foreclosure of single-family and real estate owned (REO) evictions have been extended by the Federal Housing Finance Agency (FHFA) until March 21, 2021. REO assets are properties seized by the bank from the borrower after nonpayment of amortizations. They’re now owned by the bank that seized them.
If you’re thinking of requesting forbearance, various government agencies have already extended until June 30, 2021, the time during which borrowers can request forbearance. You can contact the Department of Housing and Urban Development, the Department of Veterans Affairs, or the Department of Agriculture, as the case may be, depending on what government-backed home mortgage program you availed.
You can also contact your bank or mortgage service provider instead and ask whether your mortgage loan is covered by or qualifies for the moratorium program.
If it’s still at all possible, and you haven’t missed any payments yet, then you’d be well advised to contact your mortgage service provider. This would give you the most comprehensive array of postponement, suspension, or nonpayment options early on.
- Refinance Your Mortgage
The third option for you to avoid foreclosure would be to refinance your loan and space it out over a longer period. Refinancing is an effective way of reducing the mortgage payments that you have to make each month. It’s really one of the most simple and direct ways of bringing down your monthly mortgage amortizations, especially when you’re having difficulties with your current cash flow.
You have to understand that your interest rates will tend to go up if you space out your mortgage over a longer period. It may seem that you’ll be paying a lower amount each month, and so it’ll really feel like a great help. But, if you do the math, you’ll realize that you’ll be paying a higher total amount spread over a longer period as a result of higher interest rates on your refinance.
Take note that fund managers familiar with mortgage loans and refinancing recommend that if you have the money or cash flow anyway, then it’s advisable to make higher payments so you can pay down the principal of your mortgage loan as soon as possible. Most mortgages don’t charge a penalty for paying off your loan ahead of schedule, but it’s best to check with your mortgage service provider to be sure.
- Refinance To Change Interest Rate Structure
There are two basic types of interest rate structures for home mortgage loans: the adjustable-rate mortgage (ARM) and the fixed-rate mortgage. Each has its own distinct set of advantages and disadvantages. This was probably mentioned to you by your mortgage service provider, but it’s highly possible you didn’t sense the need yet to note its relevance at that time.
Take note, though, that refinancing to an ARM is only viable if you’re almost done paying for your mortgage loan. Refinancing to an ARM can reduce your monthly mortgage payments and result in significant savings. The reason for this is that most of the monthly payments go to the equity and not interest when a mortgage loan is almost completely paid off. However, if interest rates go up, so would your monthly payments since you refinanced from a fixed-rate interest rate structure to an ARM.
- Modify Your Loan
One of your alternatives if you’re struggling with your monthly mortgage payments but can’t qualify for refinancing is to ask your bank or mortgage service provider to modify your loan. A loan modification is different from refinancing. To be able to modify your loan, you must show your lender that you’re not able to make your monthly payment because of your financial hardships. You must show documented proof of hardship.
Act on Your Options
If you’re having trouble making ends meet, and you’re about to miss or have already missed some of your monthly mortgage payments, then you’re probably getting more and more worried about your home mortgage with each passing day. You know the day isn’t far when the letter from the bank comes in the mail, reminding you of your missed mortgage payments, but also politely asking you to ignore it in case you already made them. Well, you have this list of options on how to avoid foreclosure of your mortgage.