Your current mortgage servicer may offer forbearance, which allows you to delay or temporarily halt monthly payments. Some plans, however, may increase your interest rate or require a balloon payment when the term expires.
As reported by USA Today, approximately 2.2 million American homeowners entered into forbearance by April of 2021. Nearly 60% of homeowners surveyed admitted that forbearance helped them remain financially stable. Many said the money they would have used for mortgage payments went toward utilities, groceries and health care instead. Maryland homeowners juggling a stretched budget may, however, also find relief through a home loan modification.
What are some pros and cons of a forbearance plan?
While you may enjoy having extra cash during the forbearance period, it may not provide a lasting solution to long-term financial problems. Of those homeowners surveyed and reported on by USA Today, 62% claimed they experienced stress when returning to making monthly mortgage payments.
Thirteen percent of survey respondents found they did not have the hoped-for additional cash remaining when their forbearance ended. Forbearance may, however, help you temporarily increase payments toward student loans and other consumer debts. This may improve a credit score and provide a benefit to some homeowners even when it does not result in cash.
How may a home loan modification resolve financial problems?
If you qualify for a home loan modification, you may receive a lower monthly mortgage payment. Severe circumstances such as a reduction of income may correct themselves by reconstructing your budget. When your current income does not cover all your expenses, you may find options for reducing your mortgage loan and other secured debts.
Forbearance may offer some homeowners a short-term solution that may also cause serious financial problems to escalate. By considering changes to your home loan, a mortgage modification may provide a more manageable payment plan.