Alternatives to Forbearance for Paying Your Mortgage
In our last post, we shared details about the CARES ACT –the new government law that helps to ease the burden of mortgage payments during the Coronavirus. If you missed that post, search our archives to learn more about who qualifies. Although there are many benefits to the CARES ACT, mainly forbearing mortgage payments, it may not be the right move for everyone –even if they do qualify!
Here’s why you may want to reconsider forbearance during the Coronavirus crisis: When you forebear your mortgage payments, it does not forgive or erase the debt. Instead, it pauses your payment obligation for a time. During the pause, according to the CARES ACT, you will not be able to be foreclosed on, nor will you accumulate late fees.
However, when time is up, some homeowners may find it challenging to resume payments according to the terms of their forbearance.
Before agreeing to forbearance, know the precise terms of the repayment. Will you need to pay the missed payment in full the first month? Will a portion be added to subsequent payments? Will you be able to make those payments?
Alternatives to Forbearance
If you don’t qualify for the CARES ACT or find that forbearance is not right for you, you may want to consider these alternatives.
1. Look into Refinancing
Depending on the type of loan you currently have, and how much is left outstanding, refinancing may be a good option.
When you refinance your home loan, you take out a new loan with a new interest rate. And considering our current record-low mortgage rates, refinancing may be the smartest option for lowering your rate and mortgage payment
What’s more, when you refinance with us, you’ll have the added benefit of knowing you’re getting a great deal while supporting a local business.
2. Look into Cash-Out Financing
Cash-out refinancing works differently than traditional refinancing. You still get a new loan. However, the loan amount is for more than what is actually owed.
Here’s how that works. First, figure out how much is still owed on your current mortgage. Subtract that amount from the amount you receive from your new loan. What is left is yours to spend on whatever financial needs you may have –including mortgage payments!
This method may solve two problems at once. Not only will you have some cash flow, but with the refi, your mortgage payments may be lower.
Bonus option: Home Equity Line of Credit
A HELOC is a second mortgage that’s similar to a credit card, although with a much lower interest rate. With this type of line of credit, pay back what you borrowed plus interest each month.
While a HELOC won’t directly help with mortgage payments like the other options mentioned, it can help you cover other expenses like utility bills or car payments.
Are you searching for ways to help make ends meet or get a little more cash flow? Refinancing or a line of credit may be just the thing! Contact us today using the online form, and we’ll help guide you through the best option for you.