Did your forbearance agreement just come due?
Who? What? When? How? Where…
All great questions!
With the end of the Cares Act, we are starting to field calls from owners around their forbearance agreements, and we it’s my understanding that some of these lump sum payments are quite large.
In most cases… there are a few options and solutions you should be aware of.
Option #1: Reinstatement… You bring in the balance of all missed payments due at one time, in one lump sum payment, and then you begin making your payments regularly moving forward.
Option #2: Work out a repayment plan… You pay your regular payment monthly along with a prorated amount of the balance of all missed payments on a monthly basis. Your payment effectively is increased until the balance of the forbearance amount is paid in full.
Option #3: There is a COVID-19 payment deferral option that may be available to you… This is a pretty cool option if you qualify. You are allowed to stack all the costs of the missed payments onto the back of the loan. This payment would be much like a balloon payment which would be due at the time your loan is paid off, at the time of sale, or at the time of your next refinance. There could be a slight increase in your monthly payment due to any taxes, insurance, or impounds that went unpaid during the forbearance agreement.
Option #4: Request a Loan Modification… There are a lot of opportunities and I will do my best to give you the jist of this.
If you can jump back in the game and make your monthly payment as it was before your stay in monthly payments, you may be able to work out an agreement with your lender to extend the terms of your loan to accommodate the necessary balance. Example… Before your forbearance agreement, you owed $500,000 on your loan, you had 24 years left to repay that debt, you hadn’t paid your mortgage in 24 months, and your payments were $2500.00/month. In essence, this means you owe the lender an additional $60,000 in principle, (interest and possible late fees), which would now go on the back of the loan making your new loan balance north of $560,000. In many cases, you would keep the payments the same and now your loan would have approximately 26 years left…
Another option may be for you to work out an agreement with your servicing company to revise the monthly payment, maybe extend the term of the loan, and in rare cases… reduce your interest rate. When I say extend the term of your loan, you may be able to have the loan extended for up to 40 years. This extension would thereby lower your monthly payments, making it easier for you to stay in your home. Now understand this… the probability of getting a lower interest rate is not very probable as rates were for all intents and purposes at all-time lows!
If you aren’t sure what Forbearance option works best for you, and you want to have a conversation with someone you can trust… give me a call or send me your information on my contact page, and feel good knowing I will do my best to help you through these challenging times.
