Options for paying your mortgage after COVID-19 related income loss

Tips on requesting mortgage payment delays amid COVID-19 crisis
Posted at 5:05 PM, Jun 22, 2020

With thousands of Arizonians out of work for months due to the coronavirus, many are facing tough decisions about what bills they can pay. That includes deciding whether to pay for groceries or make a rent or mortgage payment.

Protections were put into place, but as we have seen, people have still been forced from their homes during this pandemic.

So, what options do you have to avoid losing your home if you are facing financial difficulties?

Holden Lewis, a housing expert with NerdWallet, says no one will call you offering help, so you need to act.

"Call the mortgage servicer. You ask for forbearance. They'll ask you a couple of questions, nothing too detailed, and then you'll work out a plan," said Holden.

That plan can give you the ability to skip payments or make partial payments for up to six months on average.

It sounds great, right? Not completely.

Do not take a forbearance unless you have no other choice. It is a temporary solution that could cost you more in the long term, and when your forbearance is up, you still have to pay accumulated principal, interest, and more.

"The mortgage company is really, really going to want you to catch up on the taxes and insurance that you fell behind on first," said Holden.

He also adds your lender may ask for you to pay more each month on top of your normal payment, tack on extra payments onto the end of your loan term, or ask for you to pay it all at once.

Holden says if they do ask for it all at once, and you can't pay it, be sure to show your lender what your finances look like. That could mean showing pay stubs or bank statements.

He says to consider all options.

If you have been thinking about refinancing your home, now could be the time. Rates are still at historic lows.

If you are facing a permanent reduction in income, talk to your lender about a permanent loan modification, but be prepared to show proof it is needed.

"You're going to have to essentially give up all the financial information that you gave when you originally got the mortgage, you know, paycheck stubs and tax statements and all that stuff," says Holden.

He says one thing you should not do is take out an equity loan against your home to pay your mortgage. He says that is a risky, very short-term solution you will still have to pay back, and typically with more interest.

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