This article is reprinted with permission of the author, Sam Kiasatpour – NMLS# 300342 with CalFed Mortgage – see bottom of this post for contact information and website. In light of the new bill passed by Congress and the numerous calls I have received regarding forbearance on home loans, I would like to share the following thoughts:
Before deciding not to make your mortgage payment consider the following:
Are there consequences to forbearance on home loans due to COVID-19?
1) Remember you are dealing with lenders and they do not give away anything for free. Multiply your monthly P&I by 12–whatever that number is, they are going to get it back-one way or another. Usually, at the end of the forbearance, you start making your payments again. This will be a larger payment than what you were making. They will spread out the missed payments over a predetermined term. Again, you will pay it now, or later–but you will pay! [Loan forgiveness is not free]
2) Mortgage rates are expected to settle to the downside when this current mess subsides. If you’re in a forbearance on home loans, you cannot refinance or buy another property with a mortgage and take advantage of the lower rates and less expensive houses that are likely coming soon.
3) Once the forbearance on home loans term ends, lenders may impose a number of mortgage payments to be made before you are allowed to refinance. You may have to rebuild your “payment history.” This is my professional opinion, but I would expect it. I know how these bankers think.
4) If any of you is in dire financial straits, then you should consider it. Your family’s well-being and putting food on the table takes precedence over everything.
These suggestions are primarily directed to those who don’t need to skip payments. Please note this is my personal opinion based on three decades of experience in lending.
Take this with a grain of salt as this crisis is novel and we are in uncharted waters.
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