By now, If you are a homeowner and have a mortgage, you most likely have heard about the option for mortgage forbearance. The government, in their infinite wisdom, came up with this plan to allow homeowners to skip monthly mortgage payments for up to six months assuming that you have had a hardship related to COVID-19. What was not clear in the messaging, was that you will still owe the money back after the forbearance period.
How your lender decides to collect that money will ultimately determine whether or not your credit is negatively impacted. They will likely give you three options:
3 Reasons Refinancing Is Better Than Forbearance
1) Pay back the entire amount after the forbearance period.
2) Increase your monthly payments over the next year or two to make up for the deficit, which means your payments will be significantly higher for quite a while.
3) They may consider a mortgage modification which you would likely have to qualify for ( by proving that you’re not capable of making the payments) and they would add that amount to the end of the loan but in this case, likely your credit could be damaged.
Some of you will have no option but to go down this path. But there is another potential option to avoid all of this: refinance to either pull out a little bit of cash to get you through this nightmare period or we can set up a refinance to have you skip to monthly mortgage payments, just by structuring it that way. If you have equity in your property, this is a way to take advantage of the lowest rates in history and provide your family with a financial cushion to weather the storm. *Please note that you will not be eligible for this option if you have already requested forbearance.