Mortgage Relief – What You Need to Know First

Thinking About Forbearance? Here’s Some Things you Should Consider

The COVID-19 pandemic has caused a financial crisis and has sent a record number of people to file for unemployment.  Many companies, especially mortgage providers, have offered to suspend payments to offer financial relief. It may seem like a great idea to jump on board but there’s a lot to consider first.

The conveniently named Coronavirus Aid, Relief, and Economic Security or CARES Act, is a bill passed by Congress in order to allow homeowners to apply for up to 12 months of forbearance on their mortgage payments.  This applies specifically to loans that are federally backed, which includes loans owned by Fannie Mae or Freddie Mac.  The issue is that there are a lot of unknown variables with how this is going to work.

It’s important to note that this is mortgage relief not mortgage forgiveness.  It’s a postponement or reduction of payments. Here’s where the questions begin:

What’s your eligibility?

This mostly depends on who is servicing your loan.  It may not be the company that originated your loan as most will sell it on the secondary market.  You’ll need to contact your current provider to see if your loan is federally backed.

If your loan is not federally backed, don’t immediately despair, there are many states offering relief as well.  Though other programs may not be for a full 12 months.

Is your mortgage being extended or will the payments be larger when they begin again?

There isn’t a lot of information on whether your mortgage will become a “31” year mortgage or get restructured entirely.  If the timeline isn’t getting extended, then the unpaid amount could get rolled in and you could be looking at higher payments later.

If your mortgage payment includes insurance and taxes, how are those being paid if at all?

Most of us have our taxes and insurance rolled into our mortgage payments.  Is your bank going to pay those to offer a full reprieve or will you need to arrange paying those with your county and insurance provider?  My guess is that the bank will pay the taxes in order to protect their investment.

If the bank is going to pay for insurance they may provide force-placed insurance.  This type of insurance is usually very expensive and with minimal coverage.

Any escrow that the bank has to payout for you will certainly find it’s way pack into your balance or as a lump sum bill at some point.  Ask for clarification!

Refinancing as an Option

Interest rates are still fairly low and your best option may be to consider a refinance.  You may be able to lower your monthly payment and reduce the amount of interest you pay for the life of the loan.  If you are in a position to continue to pay your mortgage already, then this option could absolutely make life easier.

BONUS: when you refinance and your new loan is funded, you won’t make a payment until the month after the next one.  So if your loan gets funded in May, you won’t make a payment until July.  This could give you a nice reprieve all while getting a lower payment!

Thinking of selling your home? I’m passionate about helping sellers get the most for their house and hitting their goals!

I service Philadelphia and its surrounding counties such as Montgomery, Delaware, Bucks and Chester counties.  Call/text me at 267-825-1192 or email me at chris@chrishvostal.com.