Forbearance And How It Affects You in Jacksonville Florida
How Does A Forbearance Affect You
If you are having difficulty keeping up with mortgage payments, you could avoid late penalties and the risk of foreclosure when you work with a lender for forbearance. Short-term financial hardship puts you in complex situations, whether it was due to divorce, illness, job loss, or any unique circumstance.
Mortgage forbearance may seem like an enticing option since it could help you with a temporary financial setback. This option allows you to skip or reduce payments over a period of time. However, interests accumulate. In the end, you’ll need to pay the amount of money that was reduced or paused over time.
Learn more about what forbearance is and how it can affect you.
What Is Forbearance?
Forbearance occurs when your lender or mortgage servicer allows you to lower your mortgage payments for some time or pauses mortgage payments completely. Once the forbearance period ends, the payments will be owed, which could set you up for a complicated situation in the future.
This could be an option for you if you’re behind on mortgage payments or struggling to make them at all. Many use this option if they’re going through temporary hardships like the ones previously mentioned. In a nutshell, forbearance can give you time to get back on track.
How Does It Work?
Forbearance may vary according to your mortgage servicer or lender. Let them know about your situation and inquire about their available options. If you qualify for forbearance, some of the terms that will be discussed include:
- Forbearance period
- How much of your payment will be reduced (if not skipped)
- Whether forbearance will be reported to credit bureaus
- Repayment terms for when the period of forbearance terminates
Although it sounds like the perfect solution to your immediate problem, forbearance can be financially straining when it ends. You can either pay for the entire amount at once when the period ends or make additional payments for each month to the end of your loan term.
Since forbearance is a complex issue, there is no cookie-cutter approach to it. Forbearance options vary depending on your unique circumstances. Some of the factors that influence your options include the type of loan, requirements in your mortgage loan, and your servicer.
Length of a Forbearance Period
As previously stated, mortgage forbearance serves as a relief for a short-term financial problem and tends to last about one year. During that year, lenders or mortgage servicers may ask you for updates on your situation. When you provide them with information, they’ll address your options or provide you with further assistance.
If your financial hardship lasts longer than you expected, you can speak to your lender about forbearance loan modifications. This can result in extending the term, lowering interest rates, or changing the type of loan.
Can Forbearance Impact Your Financial Future and Credit?
Mortgage servicers and lenders can determine whether to report your mortgage forbearance to the credit bureaus. If they decide to report it, you’ll be relieved to know that forbearance is less damaging to your credit score than a missed payment. This option also allows you to avoid foreclosure.
As for your financial future, to be eligible for new home loans, refinancing, or repurchases, you need to reestablish yourself for credit as a credible borrower.
Why You Should Avoid Forbearance Altogether
Now that you have learned more about forbearance and all it entails, you have probably realized that it’s a double-edged sword. It will help you at the moment, but it will be more harmful than helpful in the long run. Here is a summary of why you should avoid forbearance altogether.
- Interests Accrue
- Works only for short-term
- Can negatively affect your financial future
- Have to pay what is owed when the period is over
- Repayment terms are determined by the lender or mortgage servicer
You have little to no control in a forbearance situation. There are other ways to avoid foreclosure and access money during your financial hardship.
Avoid Foreclosure, Interests, and Save Your Credit Score
If your mortgage payment has become a burden, you can no longer afford, think twice before asking your lender for forbearance. At Henry Buys Homes, we can help you leave those worries behind. Homebuyers have turned out to be of incredible help for homeowners going through financial hardship. They have benefits that will stop you from falling into more debt since they can buy your home and help you get out of your sticky situation.
We buy houses in Florida by making all-cash offers and can close in as little as 7 days. Get immediate cash in your pockets and avoid foreclosure and debt. Contact us now for a fresh start.