7 Solutions for Homeowners Struggling with Their Mortgage
The pandemic has hit the commoner hard. With many losing their jobs or witnessing significant reductions in income, making mortgage payments has become a struggle. If you, too, are facing difficulty in servicing your loan liability, below are 7 solutions you can try to ease your financial burden.
Apply For a Moratorium
Owing to the financial crisis brought about by the second wave of the coronavirus, the Reserve Bank of India has allowed banks in India to offer a loan moratorium on term loans. This means that borrowers can apply for a complete holiday of repayment of the principal and interest up to the moratorium period of two years. They can also pay only the interest part during the moratorium period.
So call your loan provider and find out if you’re eligible for the moratorium. On fulfilling the eligibility criteria, your bank can provide you with the facility in 90 days.
Refinance to a Longer-Term Loan
Refinancing your current mortgage loan to a longer term is the simplest way to reduce your monthly EMIs. It will make the repayment more affordable, especially at a time of cash crunch. However, restructuring comes at a cost- it increases the interest outgo on your loan. So go for restructuring only when you’re certain that your future income will be able to service the rescheduled loan liability.
Refinance to Change Your Interest Rate Terms
Refinancing to an adjustable-rate mortgage (ARM) can be a good idea if you’re almost at the end of the loan term. The vast majority of payments during this time are going towards your principal and not interest. Hence, refinancing to an ARM can help you with your current payment issues by reducing your monthly expenses. However, this will come at the expense of subsequent higher payments.
Challenge Property Taxes
If you feel that you’re paying a lot in property taxes, you can challenge it with your tax assessor. It may provide you some financial relief if the value of your property has dropped. You will be required to provide the officer with proof that the housing value has fallen.
Modify the Loan
For those who cannot refinance their loan, a loan modification can be the alternative to lower their monthly EMIs. You will have to prove your financial hardship to the lender to allow the loan modification.
Naturally, the process involves extensive paperwork, including the previous documents required for a mortgage loan—better contact your lender to understand the details about this option before availing it fully.
Get a Home Loan Equity
If your home is valued at much more than the mortgage loan you owe on it, then you can opt for a home equity loan for immediate financial assistance.
Home equity loans are easy to qualify, and interest is charged only on the borrowed amount. The amount is paid a lump sum and will cover any significant expense that you may have.
Eliminate Private Mortgage Insurance
Eliminating private mortgage insurance can lower your monthly expenses to some extent. If you’ve already paid more than 20% down, you can contact your lender about dropping the mortgage insurance.
Most people face financial difficulty at one time or the other in their life. Instead of panicking, try out the solutions above to help manage your monthly payments.