The mortgage forbearance provided by the CARES Act has offered the much-needed mortgage relief for millions of American homeowners during the ongoing harsh pandemic times. However, the six-month end date for many forbearance plans is approaching fast, and homeowners need to decide on the safest way to move forward.
Currently, most homeowners who opted for mortgage relief are still in their forbearance plans. However, the initial six-month deadline is nearing, meaning that many are approaching their forbearance deadlines in September and October.
If your mortgage forbearance is ending soon, you need to determine if you need to extend your forbearance plan for another six months or if you’re ready to exit. And if you’re ready to exit, you need to know what options you have.
If your mortgage forbearance is nearing its end, you have two options:
- Exit the forbearance.
- Apply for an extension of your forbearance plan.
Exit the forbearance
If you’re in a position to resume making your mortgage payments, you’re free to exit your forbearance plan. When your forbearance plan ends, and you’re ready to exit, you have the following options:
- Full or one-time lump sum repayment of the mortgage.
- Intermittent or periodic payments, where you arrange your repayment plan with your servicer over an agreed period.
- Lengthen your loan term and repay the missed amount at the end of the extended loan term, with additional mortgage payments.
- You can defer your mortgage repayment. This option lets you settle the missed amount when the home is sold, refinanced, or the mortgage term ends.
- Pursue a loan modification- “This helps borrowers who are at risk of default change their mortgage terms – usually including a lower interest rate, reduced length of the loan, or reduced monthly payment,” says Jack Boies, a senior director of housing services at Money Management International.
The choice of the right option should depend on one’s current finances, employment status, and liability to resume mortgage payments. Be sure to discuss all the options in detail with your servicer to understand every option better.
Apply for an extension of your forbearance plan
If your forbearance plan is nearing its end and you are not in a position to continue with mortgage payments, you might be able to extend your forbearance plan.
The CARES Act provided that if you have any mortgage backed by the federal government (conventional, FHA, VA, and USDA loans), you can pause your mortgage payments for up to 12 months without any extra charges.
According to Dongshin Kim, assistant professor of finance and real estate at Pepperdine Graziadio Business School, your loan servicer should give you an option to extend forbearance for another 180 days if you need it.
However, you don’t need to wait for your servicer to reach out to you about this option. “If you need to continue your forbearance, contact your mortgage servicer well ahead of your forbearance end date,” Jackie Boies recommends.
Take your time to think through and determine which option will best suit you before your forbearance plan elapses. Don’t wait until you’re about to lose your home.
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Disclaimer: The views and opinions of Eric Lawrence Frazier are his own and do not necessarily represent views of First Bank or any organization affiliated with Eric Lawrence Frazier, or the Power Is Now Media Inc. First Bank is an Equal Credit Opportunity Lender. Eric Lawrence Frazier, MBA, is also a Vice President and Mortgage Advisor with First Bank. NMLS#461807 and a California Licensed Real Estate Broker DRE# 01143482. Email: Eric.email@example.com. Ph: 714- 475-8629.
Eric Lawrence Frazier MBA
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The Power Is Now Media Inc.