Many Americans are hanging onto their homes by a thread during the coronavirus pandemic, and many more see trouble on the way. According to the U.S. Census, 9.9 million U.S. home dwellers are not up to date on their monthly mortgage payments, with many more stating they have little or no confidence they can make their next home payment.
"Millions of homeowners and their families have lost their ability to pay their mortgage during COVID-19," said Peter Gray, President, Pyramid Real Estate Group, in Stamford, Conn. "Congress and the U.S. Government did a great job reducing this impact by swiftly passing the CARES Act on March 27, 2020. That legislation provided $2.2 trillion in economic relief and included: $1200 checks, expanded unemployment, access to retirement savings for affected families, forbearance on loans, foreclosure relief, and more." "These measures were highly effective at keeping people in their homes, allowing for payments to lenders, and providing income for families during the crisis," he said.
How can I lower my monthly mortgage payments?
How can Americans who are falling behind on their payments – or are in danger of doing so – lower their mortgage payments in 2021? Experts advise taking a series of steps to get the job done. These three tips can be especially helpful.
- Contact your lenders
- Consider mortgage refinancing
- Leverage loan modifications
1. Contact your lenders
One helpful, yet often overlooked option available to some homeowners is to call your bank and ask for a lower rate. "Many mortgage lenders will grant it," Gray said. "Note that your lender will not contact you as this move is only for people who ask for help and qualify."
To qualify, you must:
- Ask for a lower mortgage amount.
- Have a mortgage loan in good standing with the lender.
- The money must be for your primary residence.
"I employed this technique on my primary residence and was granted a loan reduction of 75 basis points (0.75%) with minimal documentation and zero cost," Gray said.
2. Consider mortgage refinancing
Homeowners can inquire with their servicer about forbearance if they have suffered hardship but perhaps their best option is refinancing your mortgage into a new mortgage with a lower interest rate. See if a refinance lowers your monthly payment by crunching the numbers with this free online tool.
"Mortgage rates are at or near record lows and offer the vast majority of those who have not refinanced, the chance to reduce their monthly housing expenses," said Matt Hackett, mortgage expert at Equity Now, in New York, N.Y. "The best bet is to shop around with multiple lenders to determine the best interest rate for a refinance."
Right now, mortgage rates are hovering over the 2.70% range. That’s down from 3.7% at the end of 2019, which represents a significant rate decline – and better refinancing deals – for home mortgage borrowers.
Take advantage of today's lower rates. With Credible, you can compare loan rates and lenders and determine if a refinance could lead to a lower payment and bigger savings. Credible makes shopping refinance loans easy.
3. Leverage loan modifications
If a homeowner's income has decreased but they still have a job, they should apply for a loan modification.
"They should probably do this once their income has stabilized at the lower amount, and closer to the expiration of the nationwide moratoriums," Doucet said. "Loan modifications allow for a lower payment without a credit check or refinance costs."
If you’re not sure mortgage modification is for you, visit Credible to learn more about your mortgage refinance options.
What to do if the situation grows dire
The mortgage loan moratorium in place by U.S. government agencies like Fannie Mae, Freddie Mac, VA, FHA, and the USDA has been extended through the end of March. That comes with caveats, however.
"President Biden has indicated he will extend loan moratoriums through September," said Troy Doucet, a foreclosure defense attorney at Doucet Gerling Co. LPA in Florida and Ohio. "This will help homeowners avoid losing their houses, but will run past the deferment allowed under the CARES Act."
"That could mean homeowners will face fees, costs, or penalties that expired at the one-year mark under the CARES Act," Doucet added.
Doucet said that if a homeowner has lost their source of income and are concerned they won’t be able to afford their mortgage payments for the long haul, they should start saving what they can for a move.
"I recommend people not move from their home until required by the sheriff or court, especially in judicial sale states," he said. "That’s because they own the property (on the deed) and are responsible for it while in their name. That gives homeowners more time to save and find alternative solutions (or a new job) while protecting them legally from things like code violations."
If you’re thinking of mortgage refinancing, use Credible’s free online tool to easily compare multiple lenders and see prequalified rates in as little as three minutes.