Life has a way of throwing hardships at homeowners. Anyone can experience an unexpected job loss, illness or flood. These situations lead to economic hardship. Keeping up with mortgage payments can become impossible. Suddenly, there is the looming threat of foreclosure.
The Lone Star State recently rolled out the Texas Homeowner Assistance Fund. This program is earmarking around $700 million so homeowners do not go bankrupt. If you apply for these monies, there may be a significant wait. Forbearance is a tool that temporarily lowers mortgage payments or puts them on hold. It comes in three flavors.
1. Pausing your mortgage
Under this agreement, you get temporary relief from making payments on your home. Note that you may have to pay the entirety of this unpaid amount immediately after the grace period ends.
2. Reducing your mortgage
Your payments are lower for a certain length of time with this arrangement. Mortgage payments after the forbearance finishes include a chunk of the overdue figure.
3. Extending your mortgage
A final structure is deferring payment. Debt from the months you skip gets added to the end of your agreement, thus pushing out your mortgage end date. Approval for this option may mandate taking out a second loan.
Note that interest continues to accumulate under all these scenarios. The good news is that forbearance should not negatively affect your credit rating.
They say everything is bigger in Texas. That said, a smaller mortgage is sometimes necessary for keeping your home. Choose the forbearance path that best matches your financial situation.
