The Coronavirus crisis of 2020 has shaken the job market and put many homeowners in the difficult position of not being able to pay their mortgage.
In the first quarter of 2021, unemployment was 6.3%. This is a far cry from the 14.7% we saw in April 2020, but it’s still far worse than the 3.5% in February 2020.
While many homeowners have been fortunate enough to remain employed, many others have not been able to keep their jobs. Some real estate investors have also struggled with unemployed renters unable to pay rent, which the investors often need to cover the mortgages on those investment properties.
So if you find yourself unable to pay your mortgage, you’re not alone. And you need to know that you have options.
Option 1: Request a Forbearance
Mortgage loan service providers understand the crisis we’re in. And they want to help you because no one wants to repeat the mass foreclosures of the Great Recession.
Contact your service provider (the company you make mortgage payments to), and ask about your forbearance options. Service providers are being flexible, so you might be able to make partial payments or even skip payments for several months. In most cases, the missed payments will be added to the end of your loan term, so you won’t be hit with a large balloon payment.
Make sure you understand the repayment terms and get the agreement in writing, signed by all parties.
Option 2: Refinance the Mortgage
A refinance is when you pay off your existing mortgage loan with a brand new mortgage loan. And with interest rates at historic lows, now might be a great time to refinance!
The lower interest rate alone will lower your monthly payment. And you can reset the loan term, which will spread your balance out over more months and reduce the monthly payment even further.
Option 3: Sell the House
Selling the home might not be the right move for everyone, but for those with a fair amount of equity in the home, it can be a perfect solution.
By selling the home, you can pay off your expensive mortgage and move into something more affordable. Maybe a smaller home or a home in an area with a lower cost of living.
A 2020 analysis found that the average homeowner in the Bay Area is sitting on $600,000 to a million dollars in equity. Selling the house allows you to unlock that equity.
With so many companies offering remote working opportunities going forward, proximity to the office is no longer as important as it used to be. Instead of staying in the city to be close to your next job, you might be able to move further out of the city into a substantially more affordable area.
Do You Need Help?
The real estate experts at Sequoia real estate want to help homeowners in need. If you can’t pay your mortgage, you can contact us for a free consultation. Even if you’re not planning to sell, our qualified agents can advise you as you work with your loan service provider to explore your options.