What You Should Know About Mortgage Forbearance

Is a mortgage forbearance the right option for you? Today Kristen Brown of First Rate Financial joins us to help answer that question.

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Today we’re joined by Kristen Brown of First Rate Financial to discuss an important and timely topic: forbearance. 

According to Kristen, there’s a lot of misinformation out there regarding forbearance. A forbearance is when a lender agrees to lower or suspend a person’s mortgage payment for a certain period. Typically, they’ll initially offer a three-month grace period, and then oftentimes extend it to six months. 

After the forbearance period is over, though, you’re still responsible for paying the amount you would’ve owed during that time. For example, if your mortgage is $1,500 per month and your forbearance is three months, that $4,500 is due on the fourth month. A lot of people assume the forbearance amount gets tacked on at the end of the mortgage, but that’s not the case. 

A forbearance is meant to be a temporary financial solution, but it only works if you can return to full financial health by the time it’s over. Otherwise, it’s not a good option. You’re better off trying to pay your mortgage month by month. 

A forbearance is when a lender agrees to lower or suspend a person’s mortgage payment for a certain period.

If forbearance isn’t a good option, you can also try refinancing. This is another topic Kristen and her office are getting a lot of calls about, and her advice is to look at refinancing your mortgage from a holistic perspective. In other words, does it fall in line with your short-term and long-term goals? 

Too often, she says, people get tempted by low interest rates. They look at where they are while forgetting where they’ve been. Ask yourself: Where are you in your amortization? Are you trying to take out cash? How long will you remain at your current residence? What are the costs associated with living there? Consider all of these factors before deciding whether refinancing makes sense. In some cases, it makes perfect sense; in other cases, it doesn’t. 

Make sure you work with a trusted financial advisor who will be honest about your situation so you can know what’s right for you. They won’t tell you what you want to hear—they’ll tell you what you need to hear. 

Stay tuned for our next video where Kristen joins us once again to talk about the future of our economy. As always, if you have questions about this or any other real estate topic, don’t hesitate to reach out to us. We’re here to help.

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