Home. It’s where your life happens. It’s where you find comfort. But the coronavirus outbreak has left a scar on our economy which can threaten our sense of home. With so many changes happening, you may have some concerns about how the coronavirus will impact the one thing that has a major effect on your home: your mortgage.
Prior to the coronavirus pandemic, the housing market was hopping. Homes across the U.S. sold like hot cakes, with the S&P Dow Jones Indices reporting that home prices showed a 3.8% annual gain in December 2019. Now, things are much different. Here’s a look at the good and the bad news about your mortgage during the coronavirus outbreak.
Bad: Unemployment could lead to a missed mortgage payment
If you have lost your job due to the pandemic, it’s important that you file for unemployment benefits right away. Many Americans are currently dealing with this problem, and unemployment claims have swollen to more than 26 million in a five-week span. But, the sooner you file, the sooner you could receive a cash payout to help cover your mortgage payments.
If you are struggling with paying your mortgage during the coronavirus outbreak, you do have some options. Look for deferment and relief programs that could enable you to skip a payment. In addition, stimulus checks are making their way into bank accounts, so you could use that money to put towards your mortgage payment in the short-term. However, plan ahead if you can; you don’t want to be surprised by foreclosure or evection after the protections set up in the CARES Act Relief expire.
Good: Interest rates are really low
Now could be a good time to refinance your mortgage and reduce your monthly mortgage. Thirty-year mortgage rates are hovering around 3.31% and 15-year mortgages are at 2.8%. Here are some additional ways you could take advantage of these lower rates:
- A chance to switch mortgage products. If you have the ability to continue to pay down your mortgage, you could switch from a 30-year mortgage to a 15-year mortgage and pay it down faster.
- A discount in percentage points means more money in your budget. Even an extra hundred bucks saved by refinancing could go a long way to cover your living expenses during COVID-19.
- An opportunity to work with another mortgage lender. If you aren’t happy with your current lender, refinancing gives you a chance to shop around with other lenders.
Bad: It’s hard to buy or sell right now
With social distancing legally enforced in many areas, buyers and sellers are having difficulty even engaging in the basic aspects of real estate transactions.
Real estate is a person-to-person business. Masks and gloves could dampen the experience, if you are even allowed to do business at all. A survey conducted by the National Association of Realtors found that 44% of buyers are delaying their home purchase for a few months due to the coronavirus. Buyer interest is dramatically down, too. A whopping 87% of respondents in the same survey cited a decline in buying interest.
Add to this the anxiety you might feel buying a new home when even those who still have jobs are nervous about keeping them, and you have a recipe for a slow-down.
Good: There’s mortgage assistance out there
According to Section 4022 of the CARES Act Relief, a foreclosure freeze was put into place on March 13. Any federally backed mortgage loan, including FHA, VA, Fannie Mae, and Freddie Mac, is eligible for forbearance. If you are experiencing financial hardship due to COVID-19, you may request forbearance on these types of loans. Here are the forbearance guidelines from the CARES Act:
- Forbearance may be granted for up to 180 days, with an extension of an additional 180 days at the borrower’s request.
- No fees, penalties or interest shall accrue beyond the regularly scheduled or calculated amounts.
- Borrowers do not have to supply documentation to prove financial hardship to servicers.
- No foreclosure-related evictions will take place within a 60-day period beginning on March 18.
If you have a mortgage loan through other means, like a conventional loan, lenders are offering more flexibility during this time. Be sure to ask what their forbearance terms are as they may be different than government-backed mortgage loans.
Alternatives to a full loan forbearance might include deferring payments, waived late fees, or lower interest rates. In addition, you might be able to extend the life of your loan by the number of months you defer payment. But only take mortgage assistance if you need it. If you are able to continue to pay your mortgage payment, do so!
Feel at home with your finances
There is no single solution that fits everyone when it comes to debt or mortgage management. Learn how refocus your finances with our How to Manage Debt guide. We have put together some practical strategies to manage debt, evaluate your options, and find the right solution for you. Get started by downloading our free guide right now.
- How Will Coronavirus Impact My Retirement Savings? (Freedom Debt Relief)
- How to Prepare for a Recession If You are Already Struggling (Freedom Debt Relief)
- Guide to Coronavirus Mortgage Relief Options (Consumer Financial Protection Bureau)