Keeping a roof over your head is one of the most important priorities on your list of life requirements. Even so, financial situations change and the house you could afford 10 years ago may have become far too expensive now, prompting a forbearance agreement with your bank. If you believe you might not be able to catch up on payments, you might start wondering: Can I sell my house while in forbearance? The short answer is yes. The longer answer is that it depends.
What Is Mortgage Forbearance?
When you negotiate forbearance with your mortgage lender, it allows you to either temporarily pause payments or pay a lower rate. The lender makes additional arrangements regarding how you catch up on payments in the future.
If you have not yet requested forbearance, you might wonder how to get the process started. The FTC recommends calling your mortgage lender as soon as you suspect you might miss a mortgage payment. Ask the lender about allowances for hardship or forbearance. During economic declines, you may see offers from your bank asking whether you need forbearance.
How Does Mortgage Forbearance Work?
Forbearance can be worked out in a number of different ways. The ultimate results come down to the bank, the type of loan and your negotiation skills. If you choose to pause payments altogether, interest still accrues on those unpaid months. The bank may then require a lump sum payment for the missing months at the end of the period. If you feel confident your home will sell quickly, this could work for you.
In some cases, the mortgage lender simply tacks on the paused payments to the backend of your loan. Consequently, you may need to catch up on these payments over the next few decades. It could also extend the terms of the loan so that you continue to make payments for the extra months originally paused. This is often the ideal situation, but note that interest still accrues.
For homeowners trying to hold on to their homes, reduced mortgage payments may make more sense. The amount unpaid from the temporary reduction can then be added to the mortgage for 12 months following the end of the forbearance period. Interest continues to accrue as well. This works well if you expect to have a better job or pay off some debt prior to the start of the repayment period.
Can I Sell My House While in Forbearance?
Banks have one goal and one goal only: to get all the money you owe in full. Foreclosing on the home is often the last resort. This is why so many banks are willing to provide forbearance terms, especially when customers tell them ahead of time. That said, banks sometimes stand the best chance of getting the full mortgage by selling the home. While foreclosure is costly, the homeowner selling the house works perfectly.
It also benefits you: You can get out of a high mortgage rate and downsize to something that better aligns with your financial resources. It protects your credit from missed payments and foreclosure proceedings. In some cases, it might even protect you from bankruptcy and lift you out of debt. Unless you have an underwater mortgage, you likely built equity in the home that you can put to use.
Note that when you sell the home, you must do so for a high enough price to repay the mortgage. You also need to ensure you repay any additional amounts that accrued during the forbearance period. Additional expenses could include closing costs and the buyer’s agent fee. Plan accordingly to ensure you emerge with your head above water.
How Can I Sell My House While in Forbearance Quickly?
When you receive forbearance from your bank, you have a limited time to get your finances in order. If you determine the best course of action is to get rid of the house, you need to act fast. See these selling tips to help you along without breaking the budget.
Complete Basic Repairs
Whether you spend the weekend completing DIY work or you hire a local handyman, get all the major repairs out of the way. The need for repairs can easily scare buyers away, so prioritize these over cosmetic renovations.
Improve Curb Appeal
Homes are too expensive to not be beautiful. Every house has a strong selling point for curb appeal. Find yours and accentuate it. Basic things like mowing the lawn, painting the front door and pressure-washing the exterior can go far.
Staging a home is the number-one way to sell it, but when you live in it, this can be hard. Clean unoccupied rooms and keep them in the staged mode for showing. Also, try to keep the kitchen and bathrooms clean, as these rooms tend to make or break a home sale.
List on MLS
The multiple listing service database ensures your home is listed and accessible to most buyer’s agents in the area. This can exponentially improve the quality of interest you receive from buyers.
Hire an Agent
Real estate agents work for commission and take a percentage of the selling price after closing. Even if you choose not to hire a seller’s agent, the buyer will likely have a buyer’s agent that requires the same payment.
When you hire a seller’s agent, he or she splits the commission with the buyer’s agent. Consequently, you won’t save money by not working with a seller’s agent, while doing so can save you time and effort.
How Soon Can I Buy Another Home After Forbearance?
How quickly you purchase your next home depends on the mortgage forbearance agreement and your personal finances. In some cases, you might need to wait up to 12 months before you can qualify for another mortgage, but this depends on the lender. Forbearance does not show on your credit, so a new mortgage lender may have no knowledge of what your previous reasons were for selling your home.
Working with experienced real estate agents can help you determine what your options are. If you haven’t yet sold your home, they can provide more detailed answers to the question can I sell my house while in forbearance? Use the trusted FastExpert platform to find a real estate agent near you.