Accounting & Finance
How Does Mortgage Stimulus Package Help Homeowners?
With businesses closing down due to COVID-19, millions of people have lost their source of income. As a result, many families are struggling to keep up with their daily expenses and more so with paying off their debts.
The good news is that through the recent Coronavirus Aid, Relief, and Economic Security (CARES) Act, a wide range of assistance is given to different groups of people. Among them are homeowners who are having a hard time making their mortgage payments.
There are programs and options that homeowners can apply to lessen the coronavirus outbreak’s financial pressures. And to learn more about it, we’ve highlighted how the mortgage stimulus package helps homeowners during this difficult time.
Overview of The Current Stimulus Package
The U.S. government has approved a stimulus package to invigorate the ailing economy due to the COVID-19 pandemic. At $2 trillion, it is the most extensive rescue package in American history.
By injecting funds into the economy through the healthcare sector, large corporations, small businesses, and individuals, the package intends to address everyone’s ability to pay debts amidst COVID-19.
The package includes different measures, such as unemployment insurance, payroll tax deferral, paycheck protection program, stimulus payments, and a lot more. But how do homeowners benefit from this stimulus package?
Let’s explore the programs applicable to homeowners and how they could support their finances against the struggling economy.
How the Stimulus Package Helps Homeowners?
Many homeowners are experiencing financial hardship in the wake of the coronavirus pandemic. Having a reduced income or worse, being unemployed leaves them struggling to keep up with their rent or mortgage bills. Fortunately, the Coronavirus Homeowners Stimulus Package provides comprehensive protection for them.
The following are the assistance included in the package to help homeowners cope financially during this time of crisis.
There were direct checks sent to individuals who met the income thresholds below. These checks were on the income they’ve filed during the 2019 tax year. But if they have not filed yet, stimulus checks were based on a 2018 filing.
Eligible individuals received $1,200, which was adjusted to $2,400 for joint filers with an additional $500 for every child under 17 years old. Since these stimulus checks come with fewer restrictions, they could use them in whatever way they choose.
But with that amount, renters and homeowners could pay one month’s worth of housing expenses and mortgage payments.
Mortgage Relief Options
There are two protections for homeowners with federally backed mortgage loans. First, foreclosures on properties suspended until at least December 31, 2020. Lenders and servers are prohibited from starting both judicial and nonjudicial foreclosure against these homeowners.
Second, homeowners are allowed to request and obtain mortgage forbearance, which means a delayed or reduced payment for an initial period of 180 days. If necessary, they could have an extension for another 180 days.
Besides their claims of having a financial hardship related to the COVID-19 pandemic, there’s no need to submit other documentation to be eligible for these relief options.
Temporary Eviction Moratorium
The same group who were eligible for stimulus checks might also benefit from an eviction moratorium. It means that there’s a temporary halt of evictions of tenants who don’t pay rent. However, renters might need to prove that they cannot keep up with their rent due to COVID-19 despite their best effort to obtain other government assistance.
It’s worth noting that this temporary eviction moratorium not made to relieve them of any responsibility to pay rent or comply with obligations under their tenancy or lease. But it is more on to mitigate the risks of coronavirus.
What Should Homeowners Do?
Although the stimulus package allowed many homeowners to delay mortgage payments and tenants being temporarily not evicted for not paying the rent, the relief wouldn’t last long. After the given grace period, every homeowner would have to face reality and settle their obligations.
Homeowners need to check the lender’s fine print before they skip any payment despite the stimulus package’s mortgage forbearance. Knowing when the mortgage has to be paid and how much it will cost is vital so they won’t find themselves in more debts.
The same applies to rent payments. Tenants should be careful in skipping their obligations since the temporary eviction moratorium does not prevent the charging or collecting of fees or penalties due to delay of payments under their contract terms.
It’s still a good idea for homeowners to stay on top of their finances and not rely too much on another stimulus package from the government. Reviewing their current budget, prioritizing their expenses, and putting extra cash on savings no matter how small, and finding ways to earn might be more helpful.
The stimulus package is indeed a significant help to homeowners. But everyone could not rely on it in the long run. Instead of depending on the second round of a stimulus package, it wouldn’t hurt for homeowners to be more mindful in handling their finances. After all, nobody knows what’s going to happen next.