Five Tips for Homeowners Struggling With Mortgage
One of the terrifying moments in a person’s life is the possibility of losing their home. Foreclosure is a scary thing for everyone. With the coronavirus pandemic hitting the roof, there’s an increase in the number of cases and deaths globally.
The collateral damage of the pandemic is the job loss and the risk of people losing their homes. People are worrying that their homes may go into foreclosure. Some of the USA’s key districts have rates of foreclosure ranging from 1 in 1500 to 1 in 2500.
That is a very shocking and disturbing statistic. However, the good news is, the Federal Government is suspending all evictions and foreclosures on federal mortgages until August 31, 2020. A lot of financial assistance is available to people who are suffering due to the pandemic outbreak. If you are unable to pay your loan, the first thing that must be to call your loan provider. Besides that, here’s what you could do when you are struggling to pay your loan.
Refinance to a Longer-Term Loan
Although it is not wise to finance a loan through a loan, it is one way to save your house. However, you should know that the rate of interest will be very high. You could space this loan out over a longer period. It is the simplest way to reduce monthly mortgage payments. This comes handy when the bigger problem is cash flow.
Opt for a Home Equity Loan
This is an easy way to provide immediate assistance to all the struggling homeowners. However, opting for a quick home equity loan will work only if your house has a lot of equity. In simpler terms, the value of your house should be more than how much you owe.
This strategy is ideal for borrowers who have the self-discipline to pay more than what they owe each month. That is because one has to be both the minimum payment and the interest for that month.
Eliminate Private Mortgage Insurance
If, as a homeowner, you are unable to repay your mortgage, you can ask your lender to eliminate the Private Mortgage Insurance (PMI). This will reduce the burden, depending on the amount of equity in your home. Borrowers who fail to make a 20% downpayment are necessary to have PMI for a minimum duration of 2 years.
Sometimes, there are exceptions to this 2-year rule when a homeowner has made improvements to his/her home. Since the improvements have been made, there is an increase in the home’s value. And hence the lender might waive off the requirement.
Refinance to Adjustable Rate Mortgage (ARM)
Refinance to Adjustable Rate Mortgage is a viable option only if you have finished paying off your mortgage. Alternatively, if you have an adjustable-rate mortgage, when you switch to a fixed-rate mortgage, it may not lower your current monthly payments. It can also stop your payments from growing. If you have been in an ARM for a significant amount of time, one of the problems is the fixed-rate you refinance into may be higher than the existing rate, causing the monthly payment to go up.
Modify the loan
An important step in loan modification is that it requires a hardship. It can serve as an alternative for people who cannot refinance their loan, but they have to lower their monthly house payments. Borrowers must show the lender that as a result of their financial hardship, and because of this, they cannot make their house payment regularly.
Many people struggle with a home mortgage as it has a permanent scar on them and is a constant reminder of how they have been unable to keep a roof over their heads. However, one need not throw the towel in the ring as there are so many solutions which can save you and your home during moments of crisis. If you adopt the measures mentioned above according to the problems you face, you can manage your monthly mortgage payments efficiently. You could also consider talking to your financial advisor on the ways to handle the home loan mortgages and how it will reduce your burden.
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