Are you facing foreclosure after being out of work and falling behind on your house payments? You may think there is no hope, but did you know that selling your home while in forbearance might be an option for mitigating your financial situation?
Even if you are tight on money and time, there are ways to make this process as stress-free as possible. In this blog post, we will explore different strategies for selling a house while in forbearance so that you can minimize risk and hopefully get back on solid financial ground.
Don’t throw in the towel just yet – read on to learn more about how to turn a powerless situation into an empowering one!
What Is Mortgage Forbearance?
Mortgage forbearance is an agreement made between a mortgage lender and a borrower to temporarily suspend or reduce home loan payments for a defined period. This is usually an option provided to borrowers facing temporary financial hardship.
It’s crucial to understand that forbearance is not loan forgiveness; the missed payments will still need to be repaid in the future. The terms of repayment can vary; some lenders may require a lump sum payment, while others may increase the monthly payments or extend the loan term.
It’s a short-term solution that can provide breathing room for borrowers in financial distress, but it’s essential to fully understand the repayment terms to avoid a potentially larger financial burden in the future.
Can I sell My Home in Forbearance?
Yes, selling your home while in forbearance is indeed a possible option. It’s a strategy that can be beneficial, especially if you’re foreseeing continuing financial struggles that might make repayment of the deferred amount difficult. When you sell your home, the proceeds from the sale are first used to pay off the remaining balance of your mortgage.
If your property’s value has not significantly depreciated, you might even have some money left over after the sale, which you could use to navigate your financial situation.
However, it’s crucial to consult with a real estate professional and your lender to understand the potential consequences and to ensure this is the best course of action for your specific circumstances.
Pros and Cons of selling your home while in forbearance
Considering selling your home while in forbearance? There are several potential advantages and disadvantages to this decision:
Pros:
- Immediate Debt Relief: Upon selling your property, the proceeds go straight to paying off your remaining mortgage balance, effectively relieving your immediate debt.
- Potential Profit: If your property has appreciated over time, you might be able to sell it for more than the outstanding balance on your mortgage. The remaining money can be used to alleviate your financial hardship.
- Avoiding Foreclosure: If you’re unable to make your mortgage payments, selling the home can prevent a foreclosure, which can have serious implications for your future credit health.
Cons:
- Moving Costs and Challenges: Selling your house means you’ll have to find a new place to live, which can involve moving costs and potential challenges in finding affordable housing, especially during financial hardship.
- Real Estate Market Risks: If the real estate market is in a downturn, you may not be able to sell your house quickly for as much as you’d like, or it might take longer to sell.
- Possible Taxes: Depending on the laws in your area and your specific situation, you may have to pay taxes on the sale of your home.
Always consult with a financial advisor or real estate professional to weigh these pros and cons and make the best decision for your circumstances.
When Will CARES Act Forbearance End?
The CARES Act originally provided up to 180 days of forbearance for federally backed mortgages, with the possibility of extension for an additional period of 180 days. However, the end date for forbearance under the CARES Act is not universally fixed and depends upon when the borrower entered forbearance.
As of 30th June 2021, these programs have not been further extended. It is essential to check with your service provider or a financial advisor to understand the specific timeline and potential options after the end of your CARES Act forbearance.
Other Possible Options To Consider
Mortgage Refinance:
Mortgage refinance involves replacing your current home loan with a new one, often with a lower interest rate. It can help you reduce monthly payments or repay your mortgage faster. Always consult with a financial advisor to understand its implications.
Loan Modification:
A Loan Modification is a change made to the terms of an existing loan by a lender. It may involve altering the loan’s interest rate, extending the length of the loan term, changing the type of loan, or even capitalizing any unpaid interest.
The modification is primarily designed to make the loan more manageable for borrowers who are struggling with their payments. It’s a viable option for those facing temporary or long-term financial hardship.
This process differs from refinancing, as it doesn’t involve replacing the existing loan with a new one.
Repayment Plan:
A Repayment Plan is a strategy agreed upon by both the lender and borrower to pay off a mortgage that is in default. This plan allows borrowers to catch up on their missed payments over a specific period.
The regular mortgage payment is combined with a portion of the overdue amount, allowing the borrower to become current on the mortgage over time.
It is a suitable option for those who have experienced a temporary financial setback and can now afford their home loan if it is slightly higher due to the added overdue amounts.
Loan Reinstatement:
A Mortgage Reinstatement is a process that allows a borrower to bring their defaulted mortgage current by paying all past-due amounts in a lump sum payment. The reinstatement includes not just the missed principal and interest payments, but also late fees, legal fees, and any other associated charges.
This is a feasible option for borrowers who have overcome their temporary financial setback and can afford the lump sum amount. It effectively stops foreclosure and allows the borrower to continue with the original mortgage contract.
In Conclusion
As we have seen, forbearance can provide some temporary relief in the form of delaying payments on your mortgage. However, there are other actions you can take to recover from a financial hardship.
Selling your house, depending on your circumstances and situation, may be the best solution. You don’t have to file for bankruptcy or foreclosure if you’re in forbearance.
By taking the necessary steps ahead of time in order to sell your house while in forbearance, you can better protect yourself financially even during times of economic uncertainty. Don’t wait until it’s too late – act now before the problem becomes more difficult!
If selling your house is something you are considering while in forbearance, remember that you have options. Take the opportunity to evaluate those options while you still have time to make a decision and choose a path that is best for you.
Regardless of your situation, take action today and put your mind at ease -you can still sell your house while in forbearance!
