It’s unfortunate how quickly things have evolved with the Coronavirus. And, how it was necessary from Oregon’s Governor to mandate particular businesses and industries to shut down to help enforce mandates that may reduce the spread of the Coronavirus. Many of my clients, friends, and family have been negatively affected in one way or another. I’ve been hearing and seeing a lot of misinformation out there and wanted to provide some clarification on mortgage and rent relief.
Rent Deferment
Throughout the state, there has been a pause put on all evictions. In addition, there has been a pause on the requirement to pay rent. This provides tenants an opportunity to work with their landlords to stay in their homes if they were impacted financially by this virus. This isn’t an order for rent or past due rent to be forgiven. Instead, it is an order for rent collection and evictions to be deferred. Renters will still owe the money to their landlord. Tenants should reach out to their landlords if they are currently or are going to fall behind on rent. Landlords can typically work out some arrangements. Here is an excellent article for options and strategies to help renters in their conversations with their landlords.
Mortgage Deferment vs Forbearance
Homeowners with mortgages that they are concerned about falling behind on should proactively contact their loan servicer. This should be done before they fall behind on their mortgage payments. Loan providers will show what options there are to skip a few mortgage payments if homeowners have a loss of income. For most people, opting for deferment is a better option than forbearance.
A Forbearance Agreement only delays the payment of the mortgage for a short time. Then, the full amount can be due after the end of the agreement. For instance, if your mortgage payment is $1500 per month and your lender agrees to offer you a 3-month forbearance, on the fourth month, you will be due the entire three months of skipped payments and also be due on the 4th for a total of $6,000. Some lenders may offer to increase your loan payments after the 3rd month. This is so that the increase in the amount will catch a borrower back up in the next 12 months. The point is, it typically requires a short period to repay the missed payments and could cause some financial difficulties if the person isn’t thinking ahead.
Mortgage Deferment will often result in the loan being modified to pay the deferred payments towards the end of the loan. This prevents the borrower from having a Payment Shock. Check out this article for some more info on this topic.
Refinancing
For those that currently have job security but want to improve their financial position, refinancing could be an ideal strategy. Home loan rates are at or near all-time lows. Homeowners should call their Loan Officer or Mortgage Broker and discuss options to refinance down to a lower rate. Look over your credit card and higher interest rate debts to see if it makes sense to refinance. A good reason to refinance is to pay off other debt to lower your monthly obligations. Consider whether you have enough in savings and whether you should get some cash out to build up your nest egg.
Get a couple of quotes; don’t just go with the first offer. Mortgage Brokers, in particular, can be a great resource right now. Not only can they shop between multiple wholesale lenders to save their clients money on fees and better interest rates, but different lenders may have faster or slower turn times to get a loan done. Many lenders are not allowing loans to be locked. A broker can shop lenders that can lock their borrowers in. A Loan Officer that works for a Bank, Credit Union, or Retail lender may be stuck on the programs and options of just what their company offers. Contact us today to learn more.
