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Stay Informed: Managing Finances

Resources and information to help answer your mortgage and personal finance questions.

Managing Finances

Why are mortgage rates fluctuating?

Mortgage rates were at record lows recently, but they shot up when a large number of homeowners rushed to refinance their mortgages to take advantage of the low rates. They eventually dropped, but remain volatile. The rate surge may have been due to lenders increasing their rates in an effort to slow down the refinancing requests so they could better manage the demand. If that demand does drop, the rates are likely to drop too, according to Zillow economists. That said, the stock market, where mortgage-backed securities are traded, has been unpredictable. So while things appear to have settled down for now, Zillow economists say we are likely to see more volatile movements in mortgage rates as investors look for places to put their money. For more details on how investors are affecting mortgage rates, see this post in the Zillow economics research blog.

Is now a good time to refinance?

Rates are low right now, and have been lower than historic norms for some time. Whether it makes sense for you to refinance depends on the interest rate on your current mortgage and the interest rate on the one you expect to get. Getting a lower interest rate is the most popular reason to refinance a mortgage. It simply means you are swapping a higher interest rate for a lower one, which can save you money on your monthly mortgage payments. To see how different rates can change your monthly payment, check out this calculator. To learn how other costs associated with a loan can affect the total interest rate, see this article on 4 Reasons to Refinance in Zillow’s Mortgage Learning Center. Homeowners who are experiencing hardship right now could face difficulties refinancing. Talk to a mortgage lender to explore your options.

I have equity in my home. What are my options for tapping into it?

Homeowners continue to refinance their mortgages to take advantage of low interest rates, while others are tapping equity in their homes to pay for home improvements or necessities during hard times. Whether tapping your home equity makes sense for you depends on your circumstances, your ability to keep up with payments and the amount of equity in your home. Equity is the difference between what you owe on your mortgage and what your home is worth. You build equity every month when you make monthly mortgage payments and when the market value of your home increases. Some home improvements also may help you build equity. You have three main options for tapping your home’s equity. In each case, your home serves as collateral for the loan, which means that if you don’t make payments, you risk losing your home. Here are three ways to tap your home’s equity: A home equity line of credit, referred to as a HELOC. A HELOC is similar to a credit card in that you have a limit on what you can borrow, and you pay interest only on the amount that you borrow. The interest rate on the HELOC adjusts periodically, and you have to pay it back in full at the end of a predetermined time. A HELOC is a type of second mortgage. Home equity loan. Less common than HELOCs, loans allow you to borrow a lump sum at once and pay a fixed interest on that amount over a set period of time. A home equity loan is also a type of second mortgage. Cash-out refinance. With this option, you get a new mortgage for more than the unpaid principal balance on your old loan. You use it to pay off your old mortgage, and then have additional money left over for other expenses. To learn more about the different types of loans — and the pros and cons of each option — check out this article in Zillow’s Mortgage Lending Center. You can also find a deeper explanation of home equity and how to calculate it.

What can I do if I can’t pay my mortgage?

If you think you’re going to be late on a payment or miss one due to the coronavirus, the Consumer Financial Protection Bureau suggests you contact your mortgage servicer as quickly as possible. Your mortgage servicer is the company where you send your monthly payments and may be different from the place where you got your original mortgage. You may be eligible for mortgage and credit relief through the federal CARES Act, which stands for Coronavirus Aid, Relief and Economic Security. The act became law on March 27. The CARES Act gives homeowners a right to forbearance — the ability to suspend or reduce mortgage payments — for up to a year if they have a federally backed mortgage and have experienced a financial hardship related to the coronavirus. Your mortgage servicer will be able to tell you if your loan is federally backed and what options you may be eligible for. To request forbearance, contact your mortgage servicer and affirm that you are experiencing financial hardship during the COVID-19 emergency. You must contact your loan servicer to request forbearance. The CARES Act also prohibits lenders and loan servicers from beginning or finalizing a foreclosure on your property through May 17, 2020, if your property is secured by a mortgage which is federally backed. While you are receiving forbearance or other modified payment agreement agreed upon by your loan servicer, your credit also may be protected. The law says lenders who provide forbearance can’t report you to credit bureaus for late or missed payments through July 25, 2020, or 120 days after the president declares the national emergency period concerning COVID-10 is over, whichever is later. The laws states that this credit reporting protection is only available to consumers who have an agreed upon forbearance or modified payment agreement in place with their loan servicer, so it is important you contact them as quickly as possible. Even if you do not have a federally backed mortgage, you may still be eligible for a forbearance or other payment arrangement. Contact your loan servicer to inquire about any options that may be available to you. For more information, visit the Consumer Financial Protection Bureau.

I've lost my job. Where do I go for temporary housing assistance?

There’s an overwhelming amount of news and activity around this question nationally. The Forbes website has managed to wrangle most of it into a well-organized blog that is updated as new initiatives at the federal, state and local level take effect. On March 18, 2020, the federal government issued a 60-day moratorium on foreclosures and evictions for homeowners who cannot pay their federally backed mortgages. The administration said the moratorium should help financially strapped renters by giving landlords breathing room to pay their mortgage even if their tenants can’t pay their rent. The picture is a more complicated one for renters. The federal Department of Housing and Urban Development is encouraging public housing authorities to stave off tenant evictions, and some local housing authorities have adopted their own temporary bans on evictions. The public health crisis is expected to have a profound effect on renters. Even with the assistance checks in the agreement reached by the U.S. Congress, renters who lose wages during the crisis can expect to spend a larger share of their income on rent. If you can work out a plan with your landlord, do so as soon as you know you’re going to have trouble paying the rent.

I lost my job. What should I do about my student loans?

You may be eligible for temporary student loan relief through the federal CARES Act, which stands for Coronavirus Aid, Relief and Economic Security. The act became law on March 27. The CARES Act offers temporary relief for students who took out federal loans for their undergraduate, graduate or professional education. The law provides automatic suspension of principal and interest payments on federally held student loans through September 30, 2020, without penalty. You do not need to take any action to suspend payments; your federal student loan servicer will suspend billing automatically. According to the Consumer Finance Protection Bureau (CFPB), the student loan benefits provided under CARES do not apply to private student loan programs or federal loans that were refinanced with a private entity. Additionally, these benefits do not apply to federal loans that are not owned by the federal government, including Perkins loans and some under the Federal Family Education Loan (FFEL) Program. If you have loans owned by private lenders loans, contact your servicer to find out what options are available to you. The CFPB is also advising borrowers to be alert to scams. The federal government will not ask for a fee to suspend your payment, and no action is required of you. If someone asks for money to process this information, it’s a scam and you should report them to the FTC’s complaint assistant. Beyond the CARES Act, the CFPB has a trove of useful information on how to protect yourself financially from the impact of the coronavirus.

How can I protect my credit score?

The federal Consumer Financial Protection Bureau recently issued general advice on how to protect your credit score during the current health crisis when you might find yourself charging more on your credit cards due to lost income. If you’re unfamiliar with credit scores and the roles they play, this resource from the financial protection bureau is a good place to start. If you’re a homeowner with a mortgage, the federal CARES Act might protect your credit and provide some financial relief. According to the law, if the company that services your mortgage agrees to suspend or reduce your monthly payment, and you make any reduced payment on time, they cannot report you to credit bureaus for late or missed payments through July 25, 2020, or 120 days after the President declares the emergency period concerning COVID-19 over, whichever is later.

I need to curb my spending. How do I build a budget?

Getting a handle on your spending is really important whether you’re saving for the future or responding to a loss of income due to the coronavirus. Duke University’s personal finance website can walk you through the steps and offer resources such as free worksheets and recommendations on safe apps for budgeting. If you’re totally new to budgeting, the Federal Trade Commission covers the basics here, and it’s an excellent way to learn more and get started.

I’m going into debt for the first time. How can I manage it?

Money can be a major source of stress for many of us, even in the best of times. With millions of people newly unemployed, debt is becoming an even more pressing issue. If you’re suddenly faced with unpaid bills or new debts related to unemployment, you may be feeling overwhelmed or anxious. You might tamp down some of your anxiety by lassoing fears about money into a simple action plan, according to the U.S. Consumer Financial Protection Bureau. When and if you’re able, adopting debt-management tools can help you prioritize bills to ensure those related to basic needs are paid first. These types of tools also allow you to track what you owe and when you can make payments. Tackle what you can and remember that communicating with creditors is really important. You’re not the first person to experience financial hardship, and you won’t be the last. Communicating with creditors lets them know you’re trying, so contact them as soon as you know you’re going to have trouble making a payment. If your needs are immediate and pressing, call 211 on your phone or access the 211 web page to connect with local resources for help with food, housing and financial assistance. For information on debt problems — and the most common options for addressing them — visit the Federal Trade Commission.

I’m still employed, but I’m worried about my job security. What can I do to prepare in case I’m laid off?

Getting a better handle on your finances and putting money into savings each month — even if it’s a small amount — can provide a cushion during economic downturns, according to the Consumer Financial Protection Bureau. Setting aside money every month can be as simple as instructing your employer or your bank or credit union to automatically transfer a set amount to your savings every month. Beyond that, this might be a good time to take a closer look at your expenses and spending habits and see where you could make some cuts. You can use pencil and paper or choose from any number of apps that can not only help track your spending but also monitor your credit score and send reminders when bills are due. If you’re paying a high interest rate on credit card debt, think about consolidating your debt onto one with a lower interest rate. You also might familiarize yourself with the unemployment benefits and application process in your state so you feel prepared should you need to apply. For tips on how to save and strengthen your financial resilience, see the bureau’s post on staying on top of finance during COVID-19.