We are currently living in unprecedented times, which is affecting all aspects of our lives. Besides our health, our finances are a cause for worry. While some people are worried about rent, others are worried about their mortgage payments, and the fear of losing their houses.
With the newly enacted CARES Act, federally backed mortgages are being offered a bit of a relief. Following that, some states and banks have also offered some relief so that homeowners can sigh a bit of relief.
However, while you will receive some immediate relief, especially if you just don’t have the money right now to make your payments, it could make things worse, and more complicated, in the end. With all the different stipulations and requirements out there, it is really important to know who is in control of your mortgage. For instance, your bank mortgage could be owned by a bank, or serviced through a federally funded agency, such as Fannie Mae.
One of the reasons it is so important to know who your mortgage is with is, well you should know where your money is going. The reason we’re going to talk about here is that there are different options, and deadlines, depending on who your lender is.
The CARES Act gives you up to a year to put off paying your mortgage bill, which is considered a forbearance, and not a forgiveness. A forgiveness means that the payments are just forgiven, and you don’t need to pay the money at all. Forbearance means that you don’t need to pay right now, but you will need to pay.
Depending on who your mortgage is with, they might let you know that they expect payment, for all three months, in 90 days. And don’t forget the accumulated interest, which is a whole other thing. So not only would you have to make the payments that were deferred, but then you’d also have to make the payment that was originally due for that date.
For example, if you’re in the middle of a 20-year term mortgage that was $200,000 to start, and your monthly payments are $1265, you can go mortgage free for Month 1, Month 2 and Month 3. Then on your payment date of Month 4, you will owe about $7000, due to four months of mortgage payments and added interest, that hasn’t gone down in four months.
Now, keep in mind, this is just an example. If you’re less than 10 years into a $200,000 mortgage it would be higher due to the balance, and therefore the interest, being higher. Same goes on the opposite end, if you’re closer to your mortgage being paid off, or you make more than one payment a month, etc., you could end up paying less than $7000.
Whatever your situation may be, know that the “relief” that is out there, might not be beneficial to you. If you have zero money right now to pay your mortgage, then obviously you’ll want to inquire about the relief. However, if you can continue to pay your payments, it’s best that you do so, instead of thinking that you’ll just get a 3-month vacation from paying.
It’s not all doom and gloom though, like we said at the beginning, this is an unprecedented time. The situation we’re in is affecting everyone, globally, so your lending institution may be looking at things on a base by base cases.
There are options for borrowers, and some lenders are more flexible, it never hurts to give them a call. If you get in front of the situation, you have a much better chance of the institution willing to work with you. Some lenders will take the deferred payments on to the end of the mortgage loan, or they might be able to work with you to refinance your loan so that you can make payments that work for you right now so that you don’t need to defer.
Maybe you’re able to look at your finances and make cuts in other areas so that it doesn’t leave you tight for your mortgage. Do you really need that Starbucks? You should be staying home anyhow, but if you do have to go out, chances are you have a coffee machine of some sort in your house, so you can make your coffee at home and take it to go. Do you have multiple streaming services? Perhaps you can keep one and cancel the others at this time.
Whatever action you choose to take, make sure that you are fully knowledgeable in your actions and outcomes. Any changes, whether it’s refinancing, or loan forgiveness, or extension of the normal due date, should be gotten in writing to protect yourself.
Remember, this situation won’t last forever, don’t make decisions that could impact you long after things go back to the new normal. You can always sign back up for all your streaming services again.
If you have questions about your mortgage, or are looking to find a place with a lower mortgage, contact us today and we’d be more than happy to help you out.