Payoff Forbearance and Make A Profit

The super hot housing market maybe the lifeboat homeowners in forbearance have been waiting for.  If you’ve stopped making payments on your home, the increased value may have created enough equity for you to payoff the loan and interest charges and still walk away with a tax-free profit.

"It’s first important to understand how forbearance works. Forbearance is when your mortgage servicer or lender allows you to temporarily pay your mortgage at a lower payment or pause paying your mortgage for a specified amount of time.

In “normal” times, a mortgage forbearance is recorded on a borrower’s credit report and would likely have negative consequences on their score. However, as part of the CARES Act, mortgage accounts in forbearance as a result of COVID-19 cannot be reported negatively to the credit bureaus.

According to the Consumer Financial Protection Bureau (CFPB), forbearance can help you deal with a hardship, such as, if your home was damaged in a flood, you had an illness or injury. ” However, the bureau explains, forbearance does not erase the amount you owe on your mortgage,” adding, you will have to repay any missed or reduced payments.”"(1)

“During a forbearance plan, interest is not paid but still accrues in accordance with the terms of the note,” says Tom Goyda, senior vice president, consumer lending communications at Wells Fargo. “Additionally, as required by the CARES Act, no interest accrues during the forbearance period beyond the amounts scheduled or calculated as if the borrower made all contractual payments on time and in full under the terms of the note.” (2)

Can You Sell Your Home During Forbearance?

Yes, homeowners in forbearance can sell their homes. The forbearance amount would become payable upon sale of your property.  Anything left over could potentially go to the homeowners as profit.

Why You Should Consider Selling Now

If you are still in a good position in terms of your equity (you owe less than the property is worth in today’s market), there is profit to be made with a successful home sale. Even if you only break even, selling your house may be the right move for you and your family.

It is a seller’s market right now and that’s good news for those in a position to sell and move into something more affordable. You won’t have to worry about making up those missed mortgage payments skipped while in forbearance. The bank will get a lump sum at the closure of the sale that will cover whatever you owe. Anything leftover will come to you as cash— after fees, commissions and any other closing costs are covered.(3)

Click To Find Out What Your Atlanta Home Is Worth Now

(1)How Does a Mortgage Forbearance Affect Future Borrowing?, Amanda Oboza, Greater Lansing Association of REALTORS

(2)BankRate, Zach Wichter

(3) How to Sell Your House While in Mortgage Forbearance, Mario Jauregui