Unemployment, furloughs, and reduced earnings have dramatically increased since COVID-19 has shutdown the world. For most Americans, the biggest monthly expense is being impacted: mortgage payment. With this new reality, it does not mean that foreclosures are necessary for homeowners. There are options, and most mortgage lenders will work with homeowners.
The current landscape is will lead to more homeowners seeking assistance. The two most common options for homeowners seeking assistance is deferment and forbearance. Yet, most people do not know the difference between these two and as this topic has become more widely discussed, they are being used interchangeably. Below provides a simple breakdown of the differences.
The key difference is how the missed payments are eventually repaid to the lender. Mortgage companies are not going to give away months of mortgages, but they do not want homes to go into foreclosure either. They will not make as much money this way. Which is why they will offer options and find ways to work with homeowners in need.
There are other options beyond these two as well. Some providers may offer loan modification programs where terms are changed with the mortgage. This could mean extending the loan term or adjusting the interest rate. There is possibility of a cash-out refinance to help supplement lost earnings, but there are closing costs associated with this. The last resort may be to sell and downsize to reduce monthly payments or seek a lower cost rental for the short term.
The most important point of this entire blog, DO NOT WAIT. If you need help, or foresee needing help as a result of this pandemic, now is the time to reach out. Contact your lender, bank, or credit card company, there is a great chance they will find a way to work with you. Lastly, know that you are not the only one potentially in this situation. Millions of Americans have found themselves in precarious times. Be sure to seek help now, before it becomes too much to handle.
If you have questions of who to reach out to or how to seek assistance, reach out.