Up to 35 million Americans face the possibility of eviction because they cannot pay housing benefits in a timely manner. In some states, such as Mississippi, Florida, and West Virginia, the proportion of renters who are likely to be vacated was over 50% earlier this year.
If you are one of the millions of Americans affected by late rental payments or the mortgage cycle, you should be aware of federal, state, and local programs to clear the moratorium and assist with mortgage payment. But you should also formulate a plan and take specific steps to free yourself from financial and housing insecurities.
Here is a step-by-step plan to keep yourself in your home – forever:
Start by reviewing your budget
As a general rule, you should never spend more than 30% of your household income on residential purposes, including utilities or mortgage insurance and repairs. The government defines those who spend more than 30% of their income on housing as “costly”.
The logical first step in your home security plan is to evaluate your budget: Are you spending more than 30% of your gross income on housing? For example, a household earning $ 6,000 gross monthly income should not spend more than approximately $ 2,000 per month on housing costs. In the short term, you can try cutting other areas of your budget to make up for the deficit, and in a financial emergency, be sure to do so. In the long term, however, your housing costs should not exceed this 30% as you are likely to endanger other important financial needs, such as living expenses. B. Retirement provision, emergency savings and debt repayment.
Reduce housing costs or increase income
Increasing your income is a simple solution to bringing your housing costs below that 30% mark. While this is easier said than done, especially in a recession. However, consider whether there are opportunities for financial growth that will help you better manage costs. If not, it’s time to start thinking about ways to lower your housing costs.
The Covid-19 crisis, together with historically low interest rates, has created the perfect opportunity to refinance mortgages. If you intend to stay in your current home for five to ten years or more, it may make sense to refinance your home at a lower interest rate to reduce your monthly payment. If you currently have a 15 year mortgage, you can extend the term to 30 years.
Remember that refinancing comes with a cost. Use a refinance calculator or speak to a broker or finance professional to see if this makes sense for you.
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Tenants are also in an ideal climate to renegotiate their lease. Since rental prices are falling significantly in many large metropolitan areas, landlords are offering concessions and are more likely to negotiate rent. If your lease is about to be renewed, a good starting point for negotiating can be a month of free rental or about 10% off your current payment. Even if your rent is not due, tenants affected by Covid-19 with cash problems should consider writing to their landlords about rental concessions.
What to do if you are at risk of losing a home now
If you are facing a real estate crisis now, you have a better chance than usual of being able to stay in your home. That’s because the CDC passed an eviction moratorium by the end of the year that prohibits landlords from evicting you because you can’t pay rent. Remember that when the moratorium expires, you will still have to owe a rent back.
Many states and cities have also issued their own eviction moratoriums, many of which offer more protection than the CDC’s federal moratorium. In some cities, landlords cannot collect late fees. Other cities such as Los Angeles and Philadelphia have put in place tenant assistance programs to help pay rent for those affected by Covid. And it is possible that this protection will be extended until 2021 due to the recurrence of coronavirus cases.
Similarly, homeowners of homes backed by federal agencies like Fannie Mae, Freddie Mac, and others will have foreclosure protection at least until the end of the year and will be able to seek forbearance with payment of up to 180 days. And as with tenant programs, many states and cities have added homeowner protections that may be to your advantage.
These programs will eventually expire, so it is important to prepare for their end now. How will you manage your payments if you are still facing financial difficulties? Can you sell your home, move to a cheaper apartment, or live with friends or family? Do you have emergency savings that you can use to stay in your home? What other resources are available to you? Check your area’s housing resources to get help now.