The goal of forbearance is to help you get your
home loan payments reduced or suspended (typically for up to 90 days) if you’re
suffering from a temporary financial hardship.
To qualify for forbearance, you must:
- have a temporary financial hardship, such as loss
of income due to a medical condition or natural disaster
- have not missed any mortgage payments prior to
your hardship
It’s important to understand that for a
forbearance to take place, the circumstances you’re experiencing must have an
end in sight. For example, if you are unable to live in your home because of a
flood and you are waiting for an insurance payment to cover the costs of
additional living expenses, like staying in a hotel, that is a situation where
forbearance may be considered.
If you do receive forbearance assistance, when
your situation improves, you will be required to repay the past due amount from
the unpaid months of your monthly housing payment (principal, interest, taxes
and insurance).
Banks do not like to foreclose on their customer’s homes, but the fact is that
they need to if they want to stay in business. People that do not make their
mortgage payments on time cost the banks money. Many
people take out mortgages that are too costly to afford and it ends up causing
them to deal with property and home foreclosure. Who can benefit the most from
a mortgage forbearance agreement? Anyone that knows they can get the funds to
pay off their mortgage and save their home will definitely be able to benefit
from this type of agreement.
On the other hand, if someone knows that they are never going to be
able to afford their mortgage (even after forbearance), they would be better
off trying to sell their home before the foreclosure proceedings take place. In
difficult economic times, being able to work out a forbearance negotiation on
your mortgage can make a difference between keeping your house and getting
kicked out of it. Most people want to avoid going through the process of
foreclosure and always attempt to work out mortgage forbearances as last
resorts. Will everyone be able to use forbearances in order to postpone their
payments? The honest answer is no, not everyone is going to be able to enter
this kind of agreement with their bank.
People that have had a poor financial history with banks or individuals that
have bad credit are going to have a harder time getting this type of agreement.
The reason that people with bad credit and financial
history are going to have a difficult time obtaining a mortgage forbearance is
because banks are less likely to place trust in their ability to make their
payments by the final date issued in the agreement. If you have a good
financial history and a quality credit score, you
aren’t going to struggle when it comes to this type of agreement.
What you should know about any mortgage forbearance is that the interest rates
are subject to fluctuation in the new agreement. You should make sure that the
new contract does not change the interest rate and is fair to you as the
borrower. Most banks and lenders are going to try to
be as helpful as possible when issuing a new forbearance contract. If you were
able to get a for your mortgage, you
should consider yourself lucky. Understand that not all people are able to work
out an agreement and end up facing home foreclosure without a second chance
from their bank. Use mortgage forbearance to your advantage and make sure that
you make your payments on time in order to keep your house.
