Forbearance

Given our current circumstances, an excessive amount of people have lost their jobs. Despite the fact that situations like this are uncalled for, domino effects arise. No job means no income. Without income, it’s impossible to pay off  house/car payments. If payments are not made, mortgages cannot be granted down the line. This sequence of events lingers on and on, over and over. What if I told you that there is actually a solution to help resolve this financial predicament? 

What Is A Forbearance?

A forbearance is when the government will permit you to skip a payment due to a disaster or hardship, like COVID-19, and it will not come up as a late fee! This will give you time to build up your finances for a duration of time. Then, you can start paying them off as you accumulate income. Now this does not mean that the owed money is erased off of your slate completely. Again, you are still required to pay your debts off down the line. A forbearance just provides a cushion to fall back on as you collect and build up equity during a rough time period. Also, it is very important to be mindful that a forbearance program will only put a temporary hold on mortgage payments. It will NOT cover home insurance and tax. While you likely have an escrow cushion for your taxes and insurance, depending on the duration of the forbearance it might not be enough to cover all of it. This may result as a tax lean on your home.  

If You Are Currently In A Forbearance Program: What Are Your Options?

There are essentially 2 paths that you could take. If your lender allows you to, you can tag the missed payments onto the end of your mortgage period. However, if you do not qualify for this option, the best course of action is to pay off the missed payments in full. If you are in a situation where this cannot be done, it would be ideal to take advantage of today’s hot market and downsizing should be considered. This would assist in paying off those payments. You would also walk away without any red flags on your credit score, so obtaining that next home would be less of a hassle. Otherwise, you would most likely experience a downward spiral and find yourself facing a short sale or foreclosure. 

Why Is Waiting For A Short Sale Or Foreclosure Negative?

Waiting instead of taking action tends to put you in a dead end. After a foreclosure, you will not have the opportunity to buy another house. This is because your lender will not be able to provide you with another mortgage. Renting will not be in the picture either due to the fact that your credit score will be drastically affected. 

Waiting Periods For A Fresh Start After Foreclosure, Short Sale & Bankruptcy