If you took advantage of the CARES Act forbearance option in 2020, you may have found some relief in suspending your mortgage payments during the difficult strain of the pandemic. However, eventually forbearance will end and you’re going to have to start paying your mortgage again. What does that process look like for you? Do you have a plan with your lender for making up missed payments?
We’ll explain what happens when the forbearance period is over — but first, let’s briefly review the purpose of forbearance and the program created by the CARES Act.
What is the CARES Act Forbearance Program?
Mortgage forbearance can be a useful option for homeowners who need a little time to deal with financial hardship or are recovering from a financial setback such as job loss, short term disability, or illness.
The CARES Act forbearance program, signed by US Congress in March 2020, specifies that if you have a mortgage loan backed by the US government (VA, USDA, FHA, Fannie Mae, Freddie Mac) you may temporarily suspend payments if you have experienced financial hardship due to the COVID-19 pandemic.
What happens when the program ends? What does paying back the missed payments look like? What can you do if you can’t afford to start paying your mortgage? We’ll answer all those questions and more.
What Happens When CARES Act Forbearance Ends?
The CARES Act forbearance program was meant to provide temporary relief to families, but it does not eliminate what you owe, either in your total mortgage principal or in the period where payments are suspended.
Any suspended or reduced payments within the forbearance period will need to be paid back in the future, plus the interest accrued on the loan principal. When you apply for forbearance, you and your lender will work out a plan to recover the missed payments once forbearance ends.
Making Up Missed Payments After CARES Act Forbearance Ends
The specific requirements for repaying missed payments will likely look a little different for everyone. Depending on the agreement you entered into with your loan servicer when forbearance began, you may have higher payments when forbearance is over, extend the loan term and add them to the end of your mortgage, or come up with another repayment plan that suits your needs.
Repay Missed Payments in a Lump Sum
The CARES Act states your loan servicer cannot require the missed payments to be repaid in a lump sum once the forbearance period is over. However, if you can afford to, you may decide that repaying the missed payments in a lump sum is the best option for you, as you can avoid the additional interest by spreading the payments out over time.
For example, if you lost your job and sought out forbearance, but have since been rehired it might be within your means to end forbearance and get back on track with your mortgage payments.
Establish a Repayment Plan
If you can’t afford to pay back the missed payments right away, you’ll need to work out a plan with your loan servicer in order to continue with your mortgage payments and make up for the ones you skipped.
One option is to spread the total of the missed payments across a period of time. You and your lender can work out a repayment schedule and disperse the amount over the next few months to make it easier on you financially.
Extend Your Mortgage Term
Another way to recover the missed payments after the CARES Act forbearance program ends is to add the payments to the end of your loan term. Your mortgage will effectively be extended by the amount of time you were in forbearance and your payment amount will not change when the forbearance period ends.
Selling Your Home After CARES Act Forbearance Ends
If you won’t be able to pay your mortgage once forbearance ends, now is the time to consider selling your home so you can avoid defaulting on your loan and starting the foreclosure process.
Sell Your House to a Real Estate Investor
If forbearance ends and you still cannot afford to pay your mortgage, you may be at risk of falling behind on your payments and eventually start the foreclosure process. If you want to avoid losing your home and credit, you can sell your home fast for cash to a real estate investor.
Real estate investors prefer to purchase homes in their current condition — so no repairs, changes, or updates required. They also prefer to close on home sales quickly for cash and without a Realtor. This means you can sell your home on your timeline.
If you’re facing the end of the forbearance period and are worried about what’s next, selling your home to a real estate investor will allow you to avoid the stress and credit hit of foreclosure so you can move on in a home you can more comfortably afford.
If you need to sell your house before forbearance ends, Renewed Homes can help. We’ll work with you to find a creative solution to your needs. For more information, reach out to our team today.
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