Should You Try to Pay Your Mortgage While Your Loan Is in Forbearance?
Millions of Americans have seen their finances take a turn for the worse during the coronavirus pandemic. If you’re one of them, you may have opted to put your mortgage into forbearance.
In normal circumstances, you’d need to request forbearance from your mortgage lender, and it could deny that request if circumstances warrant. But during the pandemic, homeowners can’t be denied forbearance — and they’re entitled to up to 360 days of it all in.
If your mortgage is in forbearance, you should know that your payments are not forgiven during that time. Rather, they’re paused, and you’ll need to make them up afterward. The specifics of how you do that vary from lender to lender. This is why you may want to pay some of your mortgage during forbearance, even if you’re not obligated to do so.
The upside of paying your mortgage during forbearance
If you’re having trouble making your regular mortgage payments now, imagine how difficult it could be to make those payments plus your catch-up payments. Unfortunately, that’s how forbearance works. Once the forbearance period comes to an end, you’ll need to resume your regular payments and start repaying those you missed. And that could prove difficult if your financial situation doesn’t improve much between now and then.
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If you’re able to make some mortgage payments during forbearance, even partial payments, it makes sense to do so. The only exception is if you really have no money in the bank whatsoever. In that case, you may want to hang onto any spare cash to cover essential expenses like food or medication. Otherwise, tackling a portion of your mortgage now could ease the burden of catching up later.
What if you can’t pay your mortgage once forbearance ends?
If, come the end of your forbearance period, you’re still unable to make payments, you’ll need to walk through different options with your lender. Your lender may agree to modify your home loan to make your payments more affordable. Refinancing your mortgage could be a possibility, especially if your credit score is very high. Loan modification is also worth investigating. Refinancing might lower your monthly payments a little, but it may not be enough to make them affordable.
If your lender won’t modify your loan and refinancing isn’t an option or doesn’t lower your payments enough, you may need to look at selling your home. It may be difficult, but if your home is worth more than your remaining mortgage balance, you can sell it and use the proceeds to pay off your lender. That way you could preserve your credit and rent a less expensive home for a year or two until you get back on your feet. If you’re underwater on your mortgage — meaning, you owe more than what your home is worth — you’ll need to talk to your lender about agreeing to a short sale.
Forbearance isn’t a perfect solution
Forbearance has been a lifeline for homeowners during the pandemic, but there is a downside: the burden of catching up on payments after the fact. If you’re in a position to partially pay your mortgage during forbearance, it could make your life a lot less stressful down the road.
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