We all look forward to that moment when we became the homeowners of our dream home and we all aspire to have that in our lives. With so many homes out there, surely you can find one that suits you and matches your tastes, but that is not the issue in most cases. While some might have the finances needed to buy a home, most homebuyers don’t have the means to do so.
That’s why home loans have been for quite some time the way many homebuyers purchased their first home. The accomplishment felt was real but, soon after some might find themselves struggling to keep up with monthly payments. It might get hard at some point to find the means to repay the debt if, through some unforeseen circumstances, borrowers lose their jobs, have an increase in expenses, or have financial difficulties.
Events such as the coronavirus pandemic brought an increase in unemployment rates and this worries borrowers and lenders. The world’s economy is suffering over this event and there is no doubt that many people find it difficult to keep up with payments since the economy could be going into a recession. Since the future of many peoples’ careers is uncertain during these times and there is not much they can do about it, the situation would have to be handled from the other end.
There are some ways that you can properly manage your home loan in such a way that it might relieve some of that financial pressure. Here is how you can tweak some of the home loan-related payments to be towards your benefit.
Money Management
This might sound like a no brainer, but it is key if you want to relieve some of the financial pressure. Now it becomes even more important to properly manage your money if you don’t have a financial burden to carry. Get your money management skills in place so later you won’t have to throw the blame on some unpredictable situations or on others.
First of all, check your investments, and make a list of all the places you have invested money in. It is important to know where your money is and where it’s going to be. If you don’t have any investments or assets that are increasing in value, but only liabilities then you might want to think about managing your investments first. Take care of all the investments that require you to pay unnecessary interest and focus on your home loan.
Also, with well-placed investments, some borrowers were able to generate passive income and apply a couple of strategies to avoid paying interest on their home loans. So, you should consider investing if you haven’t already since this might be one of the best ways to relieve some of that financial pressure.
Make sure you have your expenses in check and take care of all those that are unnecessary. Sometimes you just have to be honest with yourself and think if you really need to spend that much money on some things that don’t really have much value afterward.
If you find yourself in a situation where you struggle financially or feel financial pressure from, bills, debt, or other monthly payments that you have to make, see what you can possibly cut off. Some payments such as loans, rent or utilities are things you can’t avoid paying, but maybe there are some other unnecessary expenses that come in monthly that you can eliminate.
Extend You Repayment Term
If you are having difficulties keeping up with your monthly mortgage payments, then you should probably consider extending the repayment term. Different from refinancing, extending your repayment term is often called re-amortizing or re-casting. This will generally cost you about $200 to $300, but this may significantly ease that financial burden, by lowering your monthly repayments for the home loan.
The whole idea is to lengthen the time you have to repay so you can do this by taking your repayment period from 15 years to 20 or even 30 years. While this is convenient as far as your monthly payments go, take note that the interest on your mortgage will significantly increase over that period of time. Therefore, as soon as you stabilize, financially speaking, it is good to reduce that mortgage back to a lower repayment term.
Just manage your home loan according to your finances. If you are really comfortable and you believe you can get ahead of your loan, do it by offsetting the mortgage in order to reduce interest that is ideal. Manage it to your possibilities in such a way that if you find yourself struggling, you might want to extend the repayment term. If you feel comfortable paying more in order to reduce your overall debt, lower the term so you pay as much as you can.
Work your way towards offsetting your mortgage to lower your interest and pay as soon as possible, but manage it according to your financial situation. It will give you some peace of mind to know that you are close to being debt-free and end your mortgage payments.
Mortgage Forbearance
With the outbreak of coronavirus, many people have lost their jobs and in a week’s time, more than 6 million jobs were lost. If anyone finds themself in this situation, then most likely extending the repayment term on a mortgage is not going to cut it. Experiencing a short-term hardship of any sort is not comfortable and having a debt to pay, along with other expenses is making it difficult for most people.
Fortunately, local governments as well as home loan lenders, understand this situation and have come up with a short-term solution for the problem until things start going in the right direction again. A forbearance plan is a mortgage service that allows people who are struggling financially to pause or reduce mortgage payments for a limited period of time. This is a moratorium given by the lender for the borrower that would allow him to skip payments on the mortgage for some time until they find themselves in a better position, financially speaking.
This doesn’t mean that your debt is erased or forgiven and you will still have to catch up with any missed payments. This might result in higher monthly mortgage repayment or higher interest rates but, you should be much better with your finances when this happens. Resume your payments as soon as possible to limit your future obligations.
This might be a real relief for many homeowners that would be helpful if they experienced things such as job loss, illness, or other circumstances.
Conclusion
Having the necessary means to keep up with your home loan payments can sometimes be hard if unforeseen circumstances occur. The coronavirus epidemic was certainly one of the occurrences that affected the real estate industry and not only. Some of the best real estate agents have to rethink the way they manage their work in order to stay safe and keep their business running.
Many people have lost their jobs and in situations like this keeping up with mortgage payments might be a problem. Some may have considered selling their homes and potentially downsizing. If that’s the case, we recommend that you find a real estate agent that can assist you through these tough times.
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home loan concept -DepositPhotos
