/fôrˈberəns,fərˈberəns/ noun
1. patient self-control; restraint and tolerance. “forbearance from taking action”
Similar: leniency, long-sufferingness, self-control
o LAW the action of refraining from exercising a legal right, especially enforcing the payment of a debt.
We know the news is talking about how because of the coronavirus, people may be eligible to “stop making their mortgage payments”. As a mortgage industry professional, we feel compelled to explain the ramifications of you acting on this announcement. Here’s what will happen: you have to contact your lender and request the hardship. Lender will send you a big stack of paperwork that you have to complete and provide documentation showing the hardship in order to start the process of “stopping your mortgage payments”. Here is what no one will tell you–THE TRUTH: what you’re applying for is called forbearance. You aren’t actually missing your mortgage payments–nothing in life is free–INCLUDING YOUR HOUSING PAYMENT.
What you are applying for is for your lender to move your current mortgage payments to the END of your loan. You’re still making them; you’re just going to make them years and years from now. If you have been in your mortgage loan for 10 years of a 30 year term, payments for year 10 months 1-12 say will just be paid by you on year 30 months 1-12–therefore your original 360 month amortization has now become 377 months. Make sense? Now, here’s what NO ONE WILL TELL YOU: When you apply for and get approved for forbearance–the servicer has to allow for 12 months. Once the forbearance is up, THEN you have to wait the required seasoning before you can refinance again or purchase a new home.
So, everyone that keeps hearing about these “0% interest rates” will never, ever, get the chance to capitalize on these historic low interest rates. Why? Because we all know these rates will not last for 18+ months. Yes, the actual mortgage rates are not 0%–that’s only the rate that the banks get when they borrow money from the federal government–but mortgage rates are at historic lows, less the last 2 1/2 weeks.
They will return to historic lows once corona subsides. But they will not last for 12-18 months. They probably won’t last for 6 months, once our economy has returned to fully functioning/working. So, if you haven’t been hard-hit because of the corona, and foresee a possibility of refinancing your mortgage loan in the next 2 years, do NOT try to “skip/miss payments” by contacting your mortgage servicer and asking for the corona relief that you’re hearing about on tv. In the long term, it’s not going to help you, it will only hurt you. Now, if you have legitimately lost your job, have no savings or emergency fund, and are struggling to buy groceries, then the relief you are hearing about would apply.
If you are contemplating redoing your mortgage, then you are far better off contacting your mortgage professional and discussing your options and a timeline, not your servicer. This is in no way us bashing you for wanting to miss mortgage payments because of what is going on; this is us hoping to stop our friends and family from ruining their chances of taking advantage of seriously the lowest interest rates I have seen in the years of being in the mortgage industry–because no one else wants to educate you on the truth of the lending industry.
