With unemployment at its highest rate since the Great Depression, some people are desperate for extra cash. Others are unable to pay their mortgage.
“A lot of times, we as consumers feel intimidated by the lenders and so we accept what’s being offered, when in fact we can negotiate,” said Chicago City Treasurer Melissa Conyears-Ervin.
Conyears-Ervin said your home should be used as an asset during these tough times. You can permanently lower your monthly payment by refinancing your mortgage, but that’s not the only option.
“A modification is an option, especially when you think about the cost that could possibly be associated with refinancing,” Conyears-Ervin said.
Loan modifications are adjustments to your current loan with your lender, while refinancing replaces your existing loan with a new one. Oftentimes loan modifications come with lower charges and fees. Just be sure to find out what those terms are first.
If you lost a job due to COVID-19 and can’t pay the mortgage, Conyears-Ervin recommended seeing if you qualify for suspended payments under the federal CARES Act. Don’t forget to negotiate if you need help.
“If you’re suspending payments on your mortgage, don’t make it so that it’s gonna double up in a few months from now, because you’re gonna dig yourself possibly into a deeper hole. So you may want to look at other options like maybe delaying the payment until the end of the loan,” she advised.
She also reminded those who can afford to invest that changes in the economy may soon create a buyer’s market with interest rates nearing record low.
“The one good thing that may come out of this COVID-19 is that someone can purchase a home for very low rates the rates are very competitive, or someone that currently owns a home can possibly refinance for not just a better rate, but possibly for a shorter period of time,” said Conyears-Ervin.
Experts say you can also carefully look at refinancing your mortgage for a higher amount to get some cash in your pocket. This is known as a cash-out re-fi, but you should be cautious that it will be within your budget and the interest rates are reasonable. First, discuss your situation with a HUD-certified counseling agency representative NHS, or IHDA. It is not highly recommended to do a cash-out re-fi, other options ought to be explored before this one, therefore, contact a housing counselor first.
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