The Biden Administration recently announced that it would be taking steps to extend the federal moratorium on evictions as well as the forbearance protections that are currently in place for home loans. The move is a bid to help both homeowners and renters who are negatively impacted by the pandemic and are struggling to keep up with their monthly payments.
However, if you are looking to reduce the home's amount of debt or get out of the house equity, waiting for these extensions may not be the best course of action. Instead, it may eventually make more sense to refinance your mortgage. With that in mind, we've listed a few things we need to know before we weigh these two options.
If you're ready to explore mortgage refinancing options, visit Credible to compare rates and mortgage lenders.
When you look closely at mortgage refinancing and mortgage forbearance, if one is a short-term option, while the other is meant to provide long-term relief. If you choose to pause the mortgage forbearance, it will temporarily pause your payment. At the end of the forbearance, however, you will have to go back to your existing mortgage conditions.
Similarly, when you refinance, you change the terms of the loan by replacing it with a new one. This means that if you can save money by securing a lower interest rate, you'll be able to enjoy a lower payment for the entire life of your refinance mortgage.
When you're ready to explore how much your monthly payment can change, use an online mortgage refinance calculator to help you figure what the low monthly payment can be with today's new rates.
Refinancing lets you take advantage of today's low mortgage rates!
There's no getting around the fact that today's mortgage rates are at historic lows. The average interest rate on a 30 year mortgage currently is just 2.98% according to Freddie Mac. If you can take advantage of these rates, you can easily reduce mortgage interest. You won't be able to do so if your loan is currently in foreclosure.
Unfortunately, once the forbearance ends, there is usually a waiting period before you can even take steps to refinance an existing loan. Experian says that you must make at least three conventional mortgages before you can refinance a traditional loan that has been in forbearance. However, the waiting time might be different if you have an FHA loan or VA loan. In the latter case, you would want to call your mortgage lender to discuss your options.
If refinancing makes sense for you, just visit Credible to get pre-qualified rates in minutes without damaging your credit score.
Refinancing may help you pay off your mortgage sooner.
In addition to allowing you to take advantage of record-low refi rates, refinancing may actually help you pay off your home loan sooner than if you put it in forbearance. Simply put, if you choose to refinance your mortgage, you have the option of switching from a 15-year mortgage to a 30-year mortgage which can help you in achieving your goal of paying off your mortgage sooner.
With forbearance, however, even though your mortgage payments stop temporarily, you don't get to skip them entirely. Instead, any payments that you miss on your current mortgage are usually added to the end of your loan, which means that your loan term is extended longer than you originally planned.
At the end of the day, the mortgage forbearance is meant to be an option that is there to help people in times of financial distress. If you have lost your job to the pandemic and are completely unable to keep up with your mortgage payments, forbearance may be a good option. If it's not possible to pay off your current mortgage, you might want to consider refinancing instead if money remains tight. Refinancing your mortgage may have more benefits and / or change the long run that you ultimately want.
Visit Credible to be linked with experienced mortgage lenders who can answer any questions - about the refinancing process.
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