Banks have stringent credit requirements – they are built on risk and financial algorithms. There are more strings attached when asking for a mortgage deferral as opposed to an extension on a lease payment. This is because of the credit system and the way that banks conduct their business. However, there are still ways you can legitimately defer a mortgage payment in New York.
Deferring Mortgage Payments and Your Options
Can I Defer a Mortgage Payment?
Generally, banks only defer mortgage payments to responsible borrowers, and they will only do this for a month or two at most. They operate on a fractional reserve credit system where the more money they have, the more money they can lend out and invest. For this reason, they can typically be a little ‘unforgiving’.
Even so, it is still possible for homeowners to defer a payment in New York with a ‘deferred payment plan’ and asking for a forbearance. You can arrange this with the bank if you are experiencing temporary financial problems and you qualify for the deferral. While banks do not defer payments lightly, they will take your situation into account if you approach them honestly.
If you are going through an illness or a loss of employment then you may easily qualify for a deferral program. Obviously, you’ll still have to repay the loan itself. It will simply be deferred to a different date.
How Can You Defer One Mortgage Payment?
You must contact the financial institution as soon as you realize you will be running delinquent on a mortgage payment. This is because the banks will act automatically if you miss a payment. Fail to pay more than two months of your mortgage, and the banks will take proceedings against your home. You will be notified that your home is at risk of foreclosure unless you make good on the payment.
The actual procedure for application will have a high level of variance from bank to bank. While many banks will have strict procedures in place with definite protocols, other banks may have no procedure in place. In this instance, you will have to contact a representative and see what options are available.
There may be a deferred payment option available with a different label. You might also wish to pursue refinancing or a mortgage modification plan. But you will have to demonstrate that you are going through financial hardship. This should not be difficult, either a medical record or a document from your former employer should suffice.
You will likely have to form a hardship letter outlining why you are unable to pay. This is a common requirement for those facing foreclosure on their homes. You might also have to sign a letter stipulating your intention to fix your current financial situation.
New York Mortgage Deferrals
At the time of this writing, New York Governor Cuomo has stalled foreclosures and mortgage repayments for 90 days. This is only available to eligible applicants who can prove that they are undergoing financial hardship and are unable to meet payments.
Additionally, there will be no late payment fees, no negative reporting to credit bureaus, and a grace period for all loan modifications. To qualify, you will need to be unemployed or working part-time. At the Federal level, all evictions and foreclosures on Federal Housing Administration mortgages have been stalled throughout April. This affects over 8.1 million households.
Outside of the currently available mortgage extension, you may qualify for a loan modification program in New York under the Making Home Affordable Modification Program (HAMP) if:
- Your home is your primary residence.
- You owe less than $729,750 on your first mortgage.
- You got your mortgage before January 1, 2009.
- Your total payment on your first mortgage is more than 31 percent of your current gross income.
- You can’t afford your mortgage payment due to financial hardship (covered above).
If you are out of luck in terms of deferring a mortgage payment, then you could always consider refinancing the entire mortgage. A short term mortgage can be deferred for a longer one, such as a 15-year mortgage for a 30-year mortgage. While there are many reasons to refinance, one of the most common is simply to get a lower interest rate.
As a rule of thumb, refinancing is said to be a good idea if you can get at least a 1% reduction on your monthly interest rate (preferably 2%). Remember that refinancing can cost between 2% – 5% of the principal of an existing loan. You need to use a refinancing tool or calculator and add up all the figures to see if it is worth it.
In this instance, you are going to be refinancing for a longer term with lower monthly interest payments. As an alternative to deferring a mortgage payment, you will be securing a lower monthly repayment. Some people refinance to shorter terms with higher monthly payments, with the benefit of spending less overall and paying the property off swiftly.
You may also want to look into switching from a fixed-rate mortgage (‘FRM’) to an adjustable-rate mortgage (‘ARM’). Rates for the ARM is typically lower than fixed-rate loans and are useful for homeowners who do not plan to stay in the property for longer than a few years.
Alternative Options for Mortgage Deferrals
You could consider selling your home if that is what you want to do, instead of asking how can I defer a mortgage payment. Foreclosures often sell for far less than the house is worth. To do this, you need to contact your bank. They cannot tell you who to sell to, or at what price. However, they can ask for proof of buyer funds. The mortgage may or may not stipulate a prepayment penalty.
One of the best ways to sell your house is by using a home buyer instead of a real estate agent or discount brokerage. The agent is too expensive and the discount brokerage requires a lot of work and expertise on your end. In contrast, the New York home buying process is much more straightforward, not to mention cheaper.
There are cash home buyers in New York like Leave The Key Homebuyers that purchase homes in any condition. They fix up the house themselves. The benefits of this include:
- Cash offer within 24 hours.
- Swift transactions
- No open house.
- No repair costs.
- No agent fees.
- The buyer already has funds at hand.
Mortgage Payment Deferment Summary
The key takeaway is that it is entirely possible to defer a mortgage payment in New York. The situation may not be as bad as you currently believe, and there are options available. Just make sure that you:
- Communicate your situation with the bank immediately.
- Demonstrate financial hardship with signed documents.
- Choose an alternative option.
- Repay the loan to the best of your ability.
In the majority of instances, banks are more than willing to work with homeowners, as long as the homeowner is upfront and honest about their current situation. Failing this, you still have many options available to you.
If you are looking to sell a home instead of deferring a payment, then consider a local real estate investment company that pays for homes in any condition. There are high-quality homebuyers in New York looking for fast transactions – this might be the best available option for those struggling with complex mortgage payments.