What Happens If I Can’t Pay My Mortgage?
The COVID-19 pandemic has effects that are far reaching and long lasting. You may be asking yourself “What happens if I can’t pay my mortgage?” We are here to help you make some educated decisions in this difficult journey. First you will need to do some homework and diligent work on your part.
1. Find out who owns your loan.
2. Discuss options with your mortage servicer
3. Document your hardships
If you are having a difficult time making your mortgage payments, Freddie Mac has some great options on their website that could be available to you. These options include forbearance agreements, waving late fees, haulting foreclosures, offering loan modifications, and not reporting to credit bureaus.
While these may seem like appealing options during this difficult time, it is very important to know and understand the consequences, as they can have lasting negative effects.
If you’ve asked yourself “what happens if I can’t pay my mortgage?”, you may have been reached out to by your servicer about a forbearance. During a forbearance, borrowers are given the right to stop making payments for a certain amount of time. Be aware that most forbearance options currently offered by servicers require all skipped payments due at once after the forbearance period comes to an end.
For example, if your mortgage payment is $2,000 per month and you are given a forbearance period of 4 months, you would be required to pay, in full, all missed payments once the forbearance period is over. So by the 4th month, you would owe $8,000. You would then be required to continue making payments as normal the following months.
In order to avoid a forbearance, some borrowers may choose a loan modification option. However, loan modifications may have lasting impacts as they can drastically decrease your credit score. This can have a negative impact on your ability to borrow money or make purchases in the future.
Banks are willing to give loans right now. Perhaps taking out a loan would help offer some relief. Staggering your differments may be another good option if you need help paying your mortage.
At the end of the day, if you are able to make payments and protect your credit score, you are setting yourself up for great market opportunties that will be on the other side of this pandemic. Look for ways to continue to make your mortgage payments if at all possible. Do your research and always read the fine print.
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