Forbearance 101: Everything Minnesota Homeowners Need to Know

If you're new to the world of home realty and finance, you may have heard the term "forbearance" used but not actually know what it means. In simplest terms, forbearance refers to an agreement in which a mortgage lender allows you to alter your monthly payments so you'll have time to build up your financial capital.

For homeowners in Minnesota who have fallen upon hard times financially, forbearance can be a beneficial arrangement which saves you from having to drain your bank account to pay off a loan. Keep reading to learn more about how forbearance works and when it may be beneficial to request it from your lender.

How Forbearance Works & When It Helps

If you've been facing financial struggles, applying for forbearance will allow you to alter your agreement with the mortgage lender who gave you a loan to purchase your home in Minnesota. Depending on the agreement, forbearance may place your payments on pause until you can accrue more money or may simply reduce the amount which you are required to pay each month.

Don't be fooled into thinking forbearance absolves you of having to pay back your lender; this arrangement merely delays the timeframe in which you'll pay your mortgage lender back in full. Still, for a homeowner who has recently suffered a financial setback such as a job loss or a debilitating illness, forbearance can provide you with relief until you have the resources to pay back your loan. Note that you will need to provide proof of the financial hardship you are facing to your mortgage lender to be approved for forbearance.

Forbearance isn't always the best solution for homeowners in Minnesota and, depending on your mortgage lender and your financial circumstances, it may not be available to you. Positives of forbearance include:

• You'll be able to fully eliminate or greatly reduce your monthly mortgage payments, allowing you to build up your financial resources more quickly after a setback.

• You can stave off foreclosure on your home by requesting forbearance.

• The option to sell or refinance your home remains open to you after you request forbearance.

• Forbearance will not harm your credit score.

Negatives of forbearance are:

• You'll have to repay your mortgage lender once forbearance is over, possibly in a lump sum. If you're unable to accumulate the necessary funds during forbearance, this can result in foreclosure on your home.

• Your monthly mortgage rate will likely be increased once your forbearance period is over.

• Depending on your mortgage loan, forbearance may not be an option at all or may not be a viable option for your financial situation.

Looking for Advice About Forbearance?

If you've been facing financial difficulties and are considering forbearance as a solution, it would be beneficial to first speak with an expert about your situation. Real estate agents are knowledgeable about all aspects of mortgages, including forbearance, and can advise you on whether forbearance is the right choice for you. Contact the Chris Fritch Team With eXp Realty today if you'd like to learn more about forbearance or have any other questions for our realtors.