Indiana Real Estate: Mortgage Forbearance
The worldwide pandemic is certainly having its way with Indiana homeowners and their ability to work and pay their bills. While many of you are still waiting for stimulus checks or Indiana unemployment benefits to kick in, we thought we would tackle one of your biggest expenses, your mortgage. You might qualify to postpone/delay your mortgage payment, with a forbearance agreement, and we wanted to explain that in a little more detail.
What is Mortgage Forbearance?
Technically, this option is available to homeowners who are faced with temporary financial setbacks allowing them to skip payment(s) or reduced payments on their loans. Usually, interest is still a factor and will likely accrue regardless of the situation. The time periods for these agreements are meant for short-term relief and typically don’t last longer than a year.
Why Forbearance is Worth Exploring
We are not Indiana mortgage experts, we leave that to the professionals, but we know how this can both benefit and hurt our fellow neighbors in Fishers, Carmel, Indianapolis, Noblesville, Westfield and beyond. We believe it’s always best to communicate with your specific mortgage company on your Indiana real estate, rather than go “dark” and ignore your bill. You may find these companies are more willing to work with you if you stay in contact with them. By choosing the communication path, you can avoid late payments, threatening correspondence, and maybe even foreclosure.
The option of forbearance with your Indiana property, such as a home in Fishers Indiana, allows you to work directly with your lender to come up with a plan and structure while you work through the financial setback. This is usually done for a specified time period. While these options have been used in the past for job layoffs and persons with illnesses mostly, the COVID19 virus is taking this option center stage during the pandemic.
Why Forbearance is a Little Tricky
Forbearance is not a “grant” or “waiver”… you will still owe the same amount of money on your home and will be expected to make up the payments. How your payments are repaid can be negotiated, but they don’t just ‘go away,’ unfortunately. While some companies will allow you to skip payments for a few months, they may expect you to pay the full balance at the end of your forbearance agreement. So what might be a $1200 a month mortgage payment on your Carmel, Indiana home; will be $3600 after three months of non-payment.
Mortgage companies might also report this to credit agencies. While forbearance doesn’t hurt your credit like non-payments, foreclosures, or bankruptcies; you should be aware that some lenders will report the payment suspension. Depending on your situation, this can make getting another home loan much harder in the future.
How to Obtain Mortgage Forbearance
Every lender will be different. It’s important that you reach out to the entity handling your Indiana home mortgage and start asking questions. Use your mortgage statement and start with the general customer service number. Most companies will ask you to fill out an application for forbearance. During the COVID19 pandemic, some mortgage companies and government loans (FHA, VA, Fannie Mae, Freddie Mac) aren’t requiring documentation for a three month period. After the three months, Indiana real estate property owners can ask for additional time, but keep in mind the payments will keep accruing. Regardless of your history with your lender, it’s important you work through the process and not assume your application will be denied, especially during this pandemic time period.
Your lender will work with you to determine the terms of your forbearance agreement. This will include repayment and/or specified time frames and monies owned. Other terms might include; if and when the lender will report your non-payment to credit agencies, how you will repay the balance at your due date (payment form,) and how much interest will accrue during the forbearance time frame.
Some lenders will offer what’s called a “reinstatement” option which means you’ll have to repay the lump sum of payments missed at the end of the agreement. Other lenders/options may include a “repayment” structure where they will split repayment funds over a certain amount of months on your loan after the forbearance timeframe ends. Finally, there are even plans that will allow you to pay that sum at the end of your mortgage which would lengthen your mortgage term. All of these options are worth exploring and learning about in your pursuit of a forbearance agreement.
What if The Financial Hardship Lasts Longer
If your hardship lasts longer than the one outlined in your forbearance agreement, you’ll want to talk to your lender about a mortgage loan modification. This structure takes your lending terms and modifies them so they are more manageable. This is a whole other article but something worth noting and asking your lender about.
Shelly Walters Realty Group in Indiana knows how tough situations like this can be and are here to help as much as possible. We are open to answering any questions you might have. If we don’t know the answer, we will undeniably know someone who does. Please reach out to us anytime for any of your Indiana real estate questions.