SKIPPING THE MORTGAGE PAYMENT March 28, 2020
Have you heard the news talk about skipping a mortgage payment? Or perhaps the news discussed forbearance options and delayed foreclosure or evictions? This is always the last resort because you signed a legal agreement to pay the mortgage payment if you want to keep the house. A home is not a right in this country.
Some borrowers will be tempted to skip payments whether they need to or not. Before you cancel that auto-draft, go to your lender‘s website which it has lots of options, mights and maybe’s. The note you signed with the attorney at the closing table has NO mights or maybes. Don’t be deceived. Those skipped payments are NOT forgiven but mIght or maybe delayed or restructured, resulting in a large lump sum or higher interest rate with a restructured mortgage payment months later.
If you have the financial resources, you should continue to make payments, as skipping payments will likely cause significantly more financial strain at a later date. If you really have no money and absolutely can not make your payment, don't just stop paying. Call your lender and discuss the options thoroughly so you understand the full consequences of your next step. The hold times and recordings may be long, but knowing their next step will be worth the wait.
UPDATE 4/30/2020- It seems the lenders and the government are working together to make reasonable adjustments to mortgage payment plans and provide solid information for those in need. The particulars are going to be unique with each lender and borrower, so please get the mortgage adjustments they offer in writing including whether they will be reporting these delayed payments to the credit bureau. If you have any problems where a lump sum payment for all the skipped payments is immediately requested after the relief, reach out to the CFPB for further assistance. The maximum relief which I have heard is 12 months of deferred payments, but your negotiations and personal circumstances will determine what is available to you. Be safe my friends!
Did You Know?
Making one extra principle and interest payment a year will knock about 7 years off your mortgage and save you thousands of dollars.
"Bi-Weekly" mortgage payment programs charge fees and do for you what you can easily manage. They say they save you an impressive amount of money on your mortgage and reduce the number of years you pay on your mortgage.
This is true, but you don't NEED them to get those savings, and by doing it yourself, you save even more money!
This is how they typically work: The company places your 1/2 mortgage payment in their account every two weeks, then they hold the payment until all of the mortgage payment is collected. During the course of a year 26 deductions will be made from your account. With the extra 2 deductions, the "Service" makes one additional mortgage payment every year. In other words rather than making 12 mortgage payments, 13 payments are made.
The enticement is that they are providing a special service when you don't have the time or discipline to make it happen.
The real story is that there is an easier way to do this - with no payment shock- and your mortgage company will immediately credit the payment to your account. Just deduct your mortgage payment automatically from your account each month with an additional 1/12 of your principle and interest payment applied to the principal balance each month. (Extra money is automatically applied to principle unless you tell your mortgage company to do something else with it.)
New Monthly Payment = Monthly Payment + (Principle & Interest /12) .
At the end of 12 months, you will have made an additional mortgage payment and you won't pay any fees to a servicer nor will you have had your money held in limbo. Now that just makes cents!
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I'm passionate about helping people achieve their home dreams
with the best possible financial options.
The Changes for 2018 Taxes
Two lost housing deductions pop
off the new tax bill which you should know about, and I've also included one
reminder of an unchanged deduction.
They are no longer deductible
if you are not active military. Before they were deductible if
you moved over 50 miles for a job. There were more specific terms,
however, now it is simple. You
can't deduct the expense.
HOME EQUITY LINE
This product's interest has
been deductible forever, but no more. This essentially kills the benefits of
the piggy back loans (getting a first and second mortgage combination product),
though they have decrease in popularity over the last five years.
Having that handy equity line
available is still nice due to its low interest rate, but it is no better than
a low interest credit card and potentially worse for you, since it is tied to
real property. This makes it a much more secure bet for the lender and gives you no
added benefit for allowing the lender to hold a piece of your property’s
equity. You can't deduct the
Here's more information: https://www.marketwatch.com/story/most-home-equity-loan-borrowers-dont-understand-how-trumps-tax-code-affects-them-2018-02-02
Having no deduction on the
equity line make mortgage insurance more appetizing. Yes, I never thought I was say that either, but the legislature did
not touch the mortgage insurance deduction.
So, you could go get a fixed
rate second mortgage at 9% or so, or you could have the dream that the mortgage
insurance is going to go away in a few years, and during the life of the
mortgage insurance, it could be entirely tax deductible. Not a bad dream, sort
of, until you get to the “however”. And here it is. However, it’s only tax
deductible up to a point. If your adjusted gross income exceeds $109,000 or $54,500 if
married and filing separately, the IRS prohibits you from deducting mortgage
Here is more
ARE MY CHOICES IF I HAVE AN EQUITY LINE!?!?!?
-Bite the Bullet and Endure
Honestly, it might not
matter. The “might” is the problem, so take the second choice.
- Review your debt allocation and consider whether a refinance will benefit
If you want to look into
rolling the first and equity mortgage together, let’s take a look. Even if you need a bit of mortgage insurance
for a time, it may still be beneficial due to the tax deduction. We can look at your gross adjusted
income, how much you pay in interest with your current mortgage profile, and
what is deductible currently vs. the future, then you can consult your tax advisor too.* Shoot me an email or text for a review.
*As you know, I am a
mortgage broker, not a tax advisor.
Homestead Exemption Links
Put a quick
reminder on your to-do list. If you moved your residence in 2016, you
need to file for property tax homestead exemption.
This will reduce your property tax burden between 30-40%. Usually the county requires the filing be
postmarked by April Fool’s Day; however, technology makes it so you may not need
a stamp. Below are the links for some
metro counties to make your life a little bit easier.
COBB (By Mail or In Person Only!)
Be a friend to your friends. Share this blog as a reminder
About this time
every year, your lender is obligated to review your escrow account to keep their
monthly bill in line with the actual insurance and tax costs. When they do this
evaluation, they send you a summary of their review and either a check, or an
opportunity to send them more money. If there is a deficit, they are usually
willing to either increase your monthly payment or allow you to send them a
lump sum. We are either gleeful for a
check for the post-holidays, or grimacing with the new larger house payment. Most of
us stop our evaluation here, however, I encourage you to read further.
What is the Mortgage
Your Mortgage Escrow Account is
established by the lender to pay on-going expenses while their loan is on your home.
These expenses generally include property taxes, home
insurance, and mortgage insurance. When you first established your loan with
the lender, most likely at closing, the lender set up a separate account consisting
of several months of your estimated taxes, a year’s worth of home insurance,
and maybe a month or two of mortgage insurance. Every month after that, you’ve
made on-going contributions with your monthly mortgage payment.
Evaluating your property tax bill
If you’re not already disputing your tax bill, the
next thing you want to check on your county’s website is your homestead
exemption, especially if there was a huge tax jump. Make sure it is in
place, and it is indicated on most tax bills as a percentage reduction in the
home’s taxable value. Is the air
conditioned square footage correct and correlating with your
appraisal? If not, you may be overtaxed.
If you are also eligible for the elderly
exemption, take the time to do it! You
might have to head to the local court house to present your tax returns, but I
have seen thousands of dollars unnecessarily spent because it was “too much of
a hassle.” My belief it that earning
those thousands might be more work than a trip to the local government office!
Evaluating your home insurance
opportunity to crosscheck what your home insurance bill is and what the lender
says it is. Get aware of any increase, or change in deductible, and shop it out
again if needed. I personally have had significant jumps over time and
saved bundles by taking the time to review annually, but it does take
time. Something that can’t be earned
Evaluating Mortgage Insurance
How is the equity on your home? Is it time to
call your favorite Real Estate Agent for their realistic value of your home? If you are encouraged, take the next step and
call the lender to see what items they need for verifying your value and ridding yourself of that old mortgage
insurance payment. Conventional
loans only need 20% equity. Old FHA
loans can get rid of the insurance as well, though you do need more than 20%
equity. Call to find out how much. The
changes in the FHA laws over time make it impossible to determine without
evaluating your exact loan. New FHA
loans have mortgage insurance for the life of the loan. A few phone calls and you will know what the
Examine your Interest Rate
Is your rate
competitive with the current interest rates?
If not, give me a call. We can fix that!
In summary, be
proactive with your bills like you are with your assets. I had one friend who confessed he had been
paying for a boat’s radio for 10 years after he sold the boat because the bill
was grouped in with other vehicles. Being proactive with debt allows you to not
only be aware of where your money goes, but also find the savings that are likely in the escalating bills we all
see every year.
fantastic and fiscally sound New Year!!!
As my client, you are one of the 22% or 40 million people that use this deduction yearly. Based on the article, a lowering of the total deduction to $100,000 would not affect you. The problem lies in it being completely repealed. Get to know about before your legislator votes.
Check out this Article at CNBC Published Today