I am receiving many phone calls from clients and potential clients. They are asking – Should I take a mortgage deferment during COVID-19? It is great that many lenders are working with their customers during these times. However, before deciding to take COVID-19 relief from your lender, know exactly the details of the deal.
The key word in the question is whether you qualify for deferment or forbearance. First and foremost, do not confuse either deferment or forbearance with forgiveness. You will still be responsible for the mortgage payment. Whether it is in 3 months or at the end of the loan term, at some point, you will be required to cure your loan. This means, you will have to pay it back.
For example, your mortgage lender offers you a 3-month forbearance. Sounds great. However, in month 4, you may be liable for paying that month and the 3 prior months. That is a lot of money.
The CARES Act is complicated, and the applications need to be carefully reviewed. In many circumstances, the better answer may be to consider filing a Chapter 13 bankruptcy instead. This option will buy you time without additional interest or fees. Especially if you are one to the millions of Americans that does not have the resources to pay a lump sum cure on the loan and you don’t qualify to have your loan re-amortized and deferred, a Chapter 13 will give you meaningful relief.
The moral of the story is to be careful. There will be all sorts of deals coming from this pandemic. Some will be legit; many will be scams. If you want to come out of this in the best financial position possible, do your homework. Don’t take a mortgage deferment or forbearance through the CARES Act during COVID-19 without understanding the consequences.
We are taking calls and doing remote consultations. If you need help with debt relief, please call me. In the meantime, keep yourself and your loved ones safe and secure.