Forbearance on mortgages is a relief on your financial situation since the payments are either suspended or reduced. However, forbearance is temporary and rarely lasts for more than a year. Many homeowners in Texas elected to use the mortgage forbearance option provided by the CARES Act.
Options for after the forbearance period
Many mortgages are not backed by the federal government. In such cases, the homeowners qualify for voluntary relief programs. Although the terms of the forbearance vary, you ought to continue making your payments once the forbearance period ends. Here are ways to handle the repayment:
- Reinstatement: For reinstatement, you should pay the total amount of money reduced during the period. The amount is also inclusive of the interest and other fees. After reinstatement, you should continue paying the regular amount agreed upon when applying for the loan.
- Repayment plan: A repayment plan equally divides the funds you failed to pay during the forbearance into installments. The amount is then added to the amount you ought to pay monthly. You can negotiate the payment intervals, but they shouldn’t exceed a year. However, increasing the installment also increases the total interest.
- Mortgage modification: A modification restructures the loan while reducing the monthly payments. However, the total amount of your loan will include the amount not paid during forbearance. Thus, you use a new payment structure. This is the best option in case of filing for bankruptcy.
When forbearance ends under the CARES Act
Under the CARES Act, your loan provider shouldn’t charge any interest on the forbearance payments once the forbearance period ends. You should consult an attorney before applying for forbearance on your mortgage to get help choosing the best repayment plan for your situation.