For educational purposes only; individuals should contact their loan servicer for specific program guidance.

As the fluctuations in our economy continue, many borrowers are returning to work and financial stability. Some are still struggling or struggling in new ways. If you are experiencing the latter and are considering mortgage forbearance, you’ve come to the right blog.

Forbearance

Pursuant to the CARES Act, people facing COVID19-related financial hardships may seek mortgage forbearance; but that doesn’t necessarily mean it’s the right choice for everyone. Forbearance allows you to pause your payments for a 90-day period while you attempt to make other financial arrangements or otherwise stay afloat. It neither changes your existing balance, nor does it erase the three months of payments you are pausing; you are simply electing to make those payments at a later date.

Before your forbearance period ends, you and your loan servicer will have to decide how you will be repaying those paused payments. The options will depend on your existing loan, your protections provided, and perhaps even your loan servicer. To better understand what repaying your forbearance mortgage payments will look like, you should contact your loan servicer directly.

The Downsides

While the CARES Act promises that credit scores will not be impacted by mortgage forbearance, being in forbearance can still be harmful for you: it can impact your ability to qualify for a new loan or a refinance in the future, for example. Interest will continue to accrue on the payments you have paused, so there will not be any “savings” in this decision. If anything, after forbearance ends, you may have an even higher monthly mortgage payment.

Forbearance may not be the right option for someone who was already struggling to make payments before the pandemic hit. Luckily, there are plenty of other options to look at first.

Your Other Mortgage Relief Options

Because participating in mortgage forbearance can be complicated and stressful, we suggest exploring all your options first. We can help you with either of the two below:

Traditional Refinance

The rates we’re seeing now are some of the lowest in history! You could be saving money with lower monthly payments.

Cash Out Refinance

Similar to the traditional refinance, you can seek to lower your interest rate but with the added bonus of pulling cash out. This cash can be used to pay off some bills or anything else you may need right now.

Read more about the cash out refinance option here.

You could also do any of the following, some with the help of your current lender:

Eliminate Your PMI

You can get rid of your monthly PMI payments once you repay enough of your mortgage to gain at least 20 percent equity. Once you do so, you can reach out to your lender to request dropping the PMI, and if it is successfully removed, you will be left with lower monthly payments.

Tax Assessment Redo

If you think your home may be overvalued and you have an escrow account, you might want to request to have your tax assessment redone.  Your county’s assessment of your property value could be inaccurate and thus be keeping your taxes too high. This process can be tedious as you have to request a redo of your assessment and a hearing with the State Board of Equalization for approval.

Summary

While times are tough, you are welcome to seek out a forbearance on your mortgage if it would be the best choice for you. Everyone’s financial situation is unique and thus has different needs. That said, it’s worth taking the time to explore all your options before committing to a forbearance, as it can be fairly difficult to start making repayments after it ends.

To get started with a traditional or cash-out refinance, give us a call at 866-594-5684 or start an online application here today!

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We are here for you during these uncertain times. To learn about your mortgage relief options, please visit our COVID-19 Info Center.