Many Americans are feeling the financial crunch that has accompanied the COVID-19 pandemic. The number of Americans applying for unemployment assistance is at an all-time high and the U.S. economy wilted by nearly five percent in the first quarter of 2020. This problem has also greatly affected homeowners in the country. And many homeowners are searching for ways to save a little money on mortgage payments as they continue to weather the economic storm caused by COVID-19.
Refinaning Your Home
Read More »Refinancing may be a good option for you if one of these three factors sound appealing to you:
- A decrease in monthly payments on home loans.
- You plan to stay in your home for the foreseeable future.
- You want to pay off your home loan faster than the current terms will allow.
Forebearance
Forbearance on a home loan is an agreement between you and your loan provider that will allow you to take a pause or pay reduced payments for a set period of time. Many banks are allowing homeowners who are struggling with health and financial issues during the pandemic to take advantage of three months of home loan forbearance.
While a forbearance will provide you with substantial financial relief upfront, some banks will expect a lump sum payment for the outstanding payments on your home loan once the forbearance period runs its course. If a lump sum payment is not possible, you may be able to come to an agreement with your loan provider to add the payments have not yet made to the end of your loan.
Use Stimulus Payments
Paying your home loan with your stimulus check may technically not be saving money but it will prevent you from having to use money that was previously added to your savings.
The federal government issued a $1200 stimulus payment to a large percentage of Americans. There is also a second round of stimulus checks being considered by the government. A second set of stimulus payments could provide $2400 for married couples and an additional $1200 for each additional child in the family. This money can be used to make a payment or two on your home loan if your income has been negatively affected by the coronavirus pandemic.
Call the Bank
The coronavirus has resulted in widespread job loss and reduced hours at work for the American people. If you are a person who has seen their income affected by the coronavirus, you should discuss your financial options with either the bank that issued your loan or someone else that can deliver professional quality financial advice to you.
It is important to understand that financial institutions do not favor foreclosure actions. The act of foreclosing on a home consumes both time and finances without delivering any positive benefits. You can increase the amount of help provided to you by your lender if you call your bank as soon as you know you face a struggle to make payments on your home loan as usual.
The CARES ACT set forth by the United States government allows homeowners to request their loan payments be deferred for six months. The act requires lenders to offer six months of deferred payments and extensions for all loans backed by the federal government.
You will eliminate the stress of annoying collection calls and increase the chances of an amicable agreement if you involve your lender in the process as soon as you know there is a problem. Your lender will not be able to offer you assistance if they are unaware of the hardships you face.
Loan Modification
A loan modification could allow you to save a bit of money on your monthly home loan payments. Modifications that can be made to your loans include interest rate adjustments, a change in the length of repayment terms, and a switch from an adjustable-rate loan to a loan with a fixed-rate. Loan modifications are less complicated and do not have the expenses attached to them that are common with loan refinances because a loan modification is not a new loan.
To qualify for loan modification you may need to demonstrate:
- Financial hardship
- The inability to pay your mortgage
- The ability to stay current with modified loan requirements
- The home in question is your primary residence
The Bottom Line
The effects of the coronavirus pandemic has affected Americans in a number of ways. And as millions of Americans struggle with their new economic realities, many of them are searching for a way to stay current on their mortgage. The five suggestions above are available to homeowners who are looking for a way to save a little money on their monthly loan notes while dealing with the fallout of the coronavirus.
