It’s been a tough couple of years. And with incomes stretched tight, some homeowners may have entered a forbearance on their mortgages. This special agreement between lender and borrower gives homeowners a little breathing room, allowing them to delay or reduce mortgage payments to their lenders over a certain period of time.
However, this grace period doesn’t last forever, so if your forbearance period is coming to an end, what now? Here are a few options to consider.
See our FAQs on Forbearance
Jump back into your payment schedule.
If your income has recovered and you can start making regular payments again, congrats! Make sure you check the terms of your forbearance agreement to determine your next steps. Here’s three possible scenarios:
- You have continued to make your monthly payments throughout the forbearance period. Great news – nothing changes. Just keep continuing to make your monthly mortgage payment when your forbearance ends.
- You can afford your monthly mortgage payment going forward but can’t afford to make up the payments you weren’t required to make during forbearance.
- You’re back to work but working at a reduced income.
If option two or three describes your financial status and you’re an Amerifirst customer, reach out to us and we’ll discuss options available to you based on your situation and your loan type. We’re here to help!
TIMELINE: Follow the terms of your repayment agreement as soon as your pause ends.
Sell your home.
The good news is that most homes have gone up in value during the past couple of years, so you might be able to sell your home for considerably more than you paid for it. This may allow you to pay off your current loan early, along with the extra payments you owe for your forbearance. Depending on your selling price, you may even be able to pay off some other debts or set some aside for a future down payment. This option could free you of financial burdens, but make sure you budget enough for another place to live if your home sells.
To recap, the benefits of selling your home while in forbearance could include:
- Ability to take advantage of rising home values;
- Make a profit, pay off your current loan early, along with extra payments you owe for forbearance;
- Upgrade or downsize to a new home;
- Maintain a good credit standing; and/or
- Possibly pay off any other debt or create a cash cushion
TIMELINE: Sell before your forbearance comes due.
Refinance your mortgage or buy another home.
Before the pandemic, consumers had to wait a full year between ending a forbearance and refinancing or buying another home—a frustrating delay when interest rates are so low. However, thanks to recent changes in FHA, VA, and USDA loans you may now be able to buy or refinance anywhere from 0-12 months after your COVID-related forbearance ends. Agreements vary by lender and type of loan, but in most cases, you need to bring your loan current, enter into a loan repayment or modification plan, and/or make 3-6 months of consecutive payments. Your Amerifirst loan advisor will be happy to explain your options and help you plan a realistic timeline.
TIMELINE: Refinance or buy a new home 0-12 months after your forbearance ends.
But wait -- did forbearance affect my credit score?
As long as your loan was current at the time you entered into a forbearance agreement with your lender (and you didn’t just stop making payments), the answer is “probably not.” Just remember, at the end of the forbearance period you agreed upon, you’ll have to start making regular payments or pay the extra amount off completely if you want to keep your credit score intact.
This option may not be available for everyone. Not intended as financial or accounting advice; consult your financial advisor for more information.