If you are watching the news, you have probably heard the term “Mortgage Forbearance.” What is it and how does it work?
- You can temporarily suspend, or even reduce, your monthly mortgage payments.
- At the end of your forbearance, you will still have to repay your mortgage. Forbearance is not the same as mortgage forgiveness.
If you’re able to keep up with your payments, keep making them. Forbearance does not erase what you owe. You’ll have to repay any missed or reduced payments in the future. Make sure you understand how you will be asked to repay your mortgage. There are several ways to pay back your mortgage after forbearance, including:
- A lump-sum payment at the end of your forbearance;
- Higher monthly payments; or
- A lump-sum payment at the end of your mortgage.
There may be alternative options. Freddie Mac, for example, can provide forbearance for up to 12 months, waive penalties and fees, and offer loan modifications, among other benefits. Check with your mortgage servicer for details.
Keep in mind, mortgage forbearance does not apply to every loan. If your mortgage is through a private lender or not owned or backed by the federal government, then the mortgage forbearance provisions of the CARES Act will not apply to your mortgage. You should contact your lender for options to pause your payments.
Anyone considering mortgage forbearance should understand all the financial implications before agreeing to any alternative payment options. Although the CARES Act specifically states any delayed payments can not impact your credit report, there are rumors circulating that lenders have found a way around this by showing payments as “current” but also making notes in the comments section of your report indicating you are delaying payments. Ask questions and know before you commit.
You probably know about condos and single family homes, but have you heard of a condo-tel? A condo-tel is a condominium project that is operated as a hotel with a lobby, registration/front desk, cleaning services and more.
The units are individually owned (like condos) but there is a rental desk onsite. Owners have the option to place their unit in an onsite rental program and have it rented out like a hotel room for nightly rentals. Ownership in a condo-tel is generally for a second or third home.
Yotelpad is the latest condo-tel development in Mammoth Lakes, but there are dozens of condo-tels here: the Westin Mammoth, The Village at Mammoth, 1849 Condos, St. Anton, Seasons IV and Mammoth Estates, just to name a few. Basically it’s no different than any other condo project, but because there’s a front desk, there’s a difference in financing options.
Condo-tel financing can be challenging but it isn’t impossible. Financing on these types of properties started to retract in 2008 because of an opinion by financial institutions that condominium loans were tied to larger than normal losses or defaults.
Although restrictions are loosening up a bit, traditional lenders are usually not an option for condo-tels. Non-traditional options are available — you just need to know where to look. As long as there is one bedroom and it’s at least 500 square feet, you should be able to get a loan. A down payment of at least 25 percent is usually required, and although the rates can be pretty competitive, they tend to be slightly higher than what you’d be able to secure on a 30-year fixed loan on your primary home.
Your real estate agent should be able to walk you through what’s classified as a condo-tel and what’s not and direct you to financing options if you’re interested in buying a condo-tel property in Mammoth Lakes.
For more information on buying a condo or condo-tel in Mammoth Lakes, check out my Ultimate Home Buyer’s Guide. Give me a call if you’d like to talk: (760) 914-4664.
Not everyone can pay all cash for a home purchase. Even if you can pay all cash, it’s not always the best route to go. Below are the advantages and disadvantages of paying all cash versus purchasing a mortgage.
The benefits of paying all cash for your mortgage:
- No interest payments
- No principal payments
- No credit check
- No income qualifications
- No bank or mortgage lender
- No lender fees
Disadvantages of paying all cash:
- Ties up all your savings and disposable income
- Real estate is not easy or free to sell
- Property could lose value
- You lose taking the mortgage interest deduction on taxes
- House rich and cash poor if all your savings is tied up in the house
Benefits of taking out a mortgage:
- Mortgage interest is tax deductible
- Mortgage rates are low
- Small down payment
- Cash on hand for other things
- Improves credit score
- Can pre-pay mortgage
- Less risk if something happens to your home
Disadvantages of buying a home with a mortgage:
- You don’t own the home until it’s paid off
- Must get approved for a mortgage/could get declined
- Incredible amount of mortgage interest gets paid
- 15 to 30 years of monthly payments
- Harder to sell a property with little to no equity
The best of both worlds would be to take out a mortgage, pay a bigger down payment and pay more than the minimum payment each month. This way not all your savings is put into the property in case something happens and you need the cash later. You can always invest the cash you would have used to buy the property.
If you aren’t sure which way to go and you have a property in mind, give Sonja a call today to help with your options. She can be reached at 661-979-9000 or by email at [email protected].