7 Ways to Help Homeowners Who Are Having a Hard Time Paying Their Mortgage
Mortgage relief and other options for those infected with the Coronavirus
You’re not alone if you’re having trouble making your mortgage payments. According to ATTOM, one out of every 12,700 residences in the United States is under foreclosure as of May 2021. One out of every 5,535 houses in Nevada is in foreclosure, while one out of every 5,854 homes in Delaware is in foreclosure.
The coronavirus pandemic has resulted in increased unemployment and income loss. If you think you’re about to lose your house to foreclosure, you should know that there are programs available to help borrowers avoid foreclosure.
COVID-19 Mortgage Relief Options
For individuals affected by COVID-19, a moratorium—or postponement—on foreclosure-related evictions is in force until September 30, 2021 if your mortgage is supported by a government program.
The Department of Housing and Urban Development, Department of Veterans Affairs, and Department of Agriculture have extended the enrollment window for borrowers to seek forbearance until September 30, 2021, for those who are interested.
Forbearance is an agreement between the lender and the borrower to postpone mortgage payments in order to avoid foreclosure.
To see whether your mortgage loan qualifies for the moratorium program, contact your bank or mortgage service provider. Whether or whether your mortgage payment problems are caused by the coronavirus, the first step is to contact your loan provider. If at all possible, do this before skipping payments so that you have the most alternatives accessible to you. Experts lay out many choices for when you’re having trouble making timely payments in this article.
• Due to COVID-19.3, both Fannie Mae and Freddie Mac are assisting customers who are financially struggling to make mortgage payments.
• Whether it’s due to the coronavirus epidemic or not, if you can’t make your mortgage payments, the first step is to call your lender.
•There are several alternatives for modifying your loan repayment to make monthly installments more manageable.
1. Ask for a mortgage forbearance.
As previously indicated, both Freddie Mac and Fannie Mae issued rules for COVID-19.3 mortgage forbearance. Individuals may thus cut or discontinue their contributions at that period. Missed payments will not affect your credit score since any linked mortgage default will not be reported to the credit bureaus. After the forbearance period ends, lenders will work with clients to adjust loans as needed to reduce monthly payments. 45
2: Refinance to a Loan with a Longer Term
Spacing your loan out over a longer term is one option that might minimize your monthly payment amount. According to Al Hensling, president of United American Mortgage in Costa Mesa, California, refinancing to a longer-term loan is the easiest approach to minimize monthly mortgage payments, particularly when cash flow is an issue.
However, you should be aware that your interest rate will rise. To counteract this, Matt Hackett, operations manager at Equity Now in New York, suggests making greater installments to accelerate principle repayment. Prepayment penalties are not common in mortgages (though you should definitely check yours).
3: Refinance to change the terms of your interest rate
If you’re nearly done paying off your mortgage, refinancing to an adjustable-rate mortgage (ARM) is a reasonable alternative. “ According to Hensling, “more and more people are realizing the financial advantages that an adjustable-rate mortgage may give in the proper circumstances.” A homeowner who plans to sell their property in the next three years and presently has a $400,000 fixed-rate loan at 4.25 percent paying $1,976.76 a month is a wonderful example.
According to Hensling, if the homeowner refinanced to a hybrid adjustable-rate mortgage fixed for five years at 2.875 percent, the monthly payment would drop to $1,695.57 and the monthly savings would be $281.19.
“If a property is virtually paid off, the great majority of the monthly payments are going to equity and not interest,” says Jeremy Brandt, CEO of WeBuyHouses.com. By lowering the monthly payment at the price of future payments, refinancing to an ARM might help with short-term cash flow problems.” Nonetheless, if interest rates begin to rise, the monthly payments may rise over time.
Switching from an ARM to a fixed-rate mortgage, on the other hand, may not cut your existing monthly payments, but it will stop them from rising. “This makes sense if current fixed rates are lower than the ARM interest rate, or if you plan to relocate after three years,” Brandt explains. However, if you’ve been in an ARM for a time, the fixed rate you refinance into might be higher than your current rate, causing your monthly payment to increase.
4: Object to Property Taxes
According to Cara Pierce, a licensed housing counselor at Clearpoint Credit Counseling Solutions, a national nonprofit organization, if the value of your house has decreased, disputing your property tax may bring some financial relief. “You’ll need to call the county tax assessor’s office in the county where the home is situated to find out what kind of documents they’ll want as proof that the housing values have declined,” Pierce advises.
Pierce, on the other hand, claims that this is a short-term plan. She cautions that when home prices rise, so will property taxes. Also, keep in mind that having your house assessed might cost several hundred dollars.
5: Change the Loan
For people who are unable to refinance their loan but need to reduce their monthly mortgage payment, a loan modification is an option. It does, however, necessitate a hardship, unlike a refinancing. According to Pierce, applicants must demonstrate to the lender that they are unable to make the usual monthly home payment due to financial hardship. “This procedure necessitates the completion of considerable documentation, which must then be delivered to the lender for evaluation,” Pierce explains.
She advises homeowners to seek counseling from a HUD-approved group to fully understand their choices and get assistance in contacting the lender. “However, not all lenders provide loan modifications, and those that do may only be for a limited period of time,” Pierce notes.
Fannie Mae and Freddie Mac are both enabling homeowners to alter their loans following forbearance as part of their COVID-19 mortgage assistance schemes.
6. Get a Home Equity Loan.
A home equity loan can help struggling homeowners right away, but it only works if you have a lot of equity in your home, which means the value of your home is much higher than the amount you owe on it. Anthony Pili, first vice president, cash management director at Orange Bank & Trust Company in New York, recommends struggling homeowners to consider paying down a mortgage using a home equity line. “On home equity lines, banks normally reimburse all closing fees. “The money saved on closing expenses may be utilized to pay down the loan faster,” Pili explains.
He goes on to say that debtors who have the discipline to pay more than what is owing each month would benefit greatly from this technique, since the minimum payment is generally only the interest that has accumulated throughout the month.
7: Persuade your lender to drop private mortgage insurance.
Eliminating private mortgage insurance (PMI) might cut your mortgage payments depending on how much equity you have in your property. “I suggest contacting the lender about reducing the mortgage insurance if you have at least 20% equity in the house,” Pierce advises. She adds that borrowers who don’t put down 20% are obliged to have PMI for at least two years, but that the two-year requirement may be waived in certain cases. The condition may be removed, for example, if the homeowner made renovations to the house that raised its worth.
Don’t give up if you’re having trouble paying your mortgage. There are a number of options available to assist you in staying in your house while still managing your monthly mortgage payments.