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Mortgage Refinance Rates for Aug. 17, 2022: Mixed Rates

Mortgage Refinance Rates for Aug. 17, 2022: Mixed Rates

The national rate average for a 15-year fixed-rate refinance moved up, while 30-year fixed refinance rates shrank. The average rates for 10-year fixed refinances increased.

Like mortgage rates, refinance rates fluctuate on a daily basis. With inflation at a 40-year high, the Federal Reserve has hiked the federal funds rate four times this year and is poised to do so again in 2022 to try to slow rampant inflation. Though mortgage rates are not set by the central bank, these federal rate hikes increase the cost of borrowing money. Whether refinance rates will continue to rise or fall will depend on what happens next with inflation. If inflation begins to cool, rates will likely follow suit. But if inflation remains high, we could see refinance rates maintain an upward trajectory. If rates for a refi are currently lower than your existing mortgage rate, you could save money by locking in a rate now. As always, consider your goals and circumstances, and compare rates and fees to find a mortgage lender who can meet your needs.

30-year fixed-rate refinance

The average rate for a 30-year fixed refinance loan is currently 5.50%, a decrease of 3 basis points from what we saw one week ago. (A basis point is equivalent to 0.01%.) A 30-year fixed refinance will typically have lower monthly payments than a 15-year or 10-year refinance. If you're having difficulties making your monthly payments currently, a 30-year refinance could be a good option for you. In exchange for the lower monthly payments though, rates for a 30-year refinance will typically be higher than 15-year and 10-year refinance rates. You'll also pay off your loan slower.

15-year fixed-rate refinance

The average 15-year fixed refinance rate right now is 4.83%, an increase of 1 basis point over last week. With a 15-year fixed refinance, you'll have a larger monthly payment than a 30-year loan. On the other hand, you'll save money on interest, since you'll pay off the loan sooner. Interest rates for a 15-year refinance also tend to be lower than that of a 30-year refinance, so you'll save even more in the long run.

10-year fixed-rate refinance

The average rate for a 10-year fixed refinance loan is currently 4.92%, an increase of 2 basis points over last week. A 10-year refinance will typically feature the highest monthly payment of all refinance terms, but the lowest interest rate. A 10-year refinance can help you pay off your house much faster and save on interest in the long run. Just be sure to carefully consider your budget and current financial situation to make sure that you can afford a higher monthly payment.

Where rates are headed

At the start of the pandemic, refinance rates dropped to historic lows, but they have been mostly climbing since the beginning of this year. Refinance rates rose due to inflation, which is at its highest level in four decades, as well as actions taken by the Federal Reserve. The Fed recently raised interest rates by another 0.75 percentage points and is prepared to raise rates again this year to slow the economy. Still, it's unclear exactly what will happen next in the market. If inflation continues to rise, rates are likely to climb. But if inflation starts to cool, rates could level off and begin to decline.

We track refinance rate trends using data collected by Bankrate, which is owned by CNET's parent company. Here's a table with the average refinance rates supplied by lenders across the US:

Average refinance interest rates

Product	Rate	Last week	Change
30-year fixed refi	5.50%	5.53%	-0.03
15-year fixed refi	4.83%	4.82%	+0.01
10-year fixed refi	4.92%	4.90%	+0.02

Rates as of Aug 17, 2022.

How to find personalized refinance rates

It's important to understand that the rates advertised online may not apply to you. Your interest rate will be influenced by market conditions as well as your credit history and application.

Having a high credit score, low credit utilization ratio and a history of consistent and on-time payments will generally help you get the best interest rates. You can get a good feel for average interest rates online, but make sure to speak with a mortgage professional in order to see the specific rates you qualify for. To get the best refinance rates, you'll first want to make your application as strong as possible. The best way to improve your credit ratings is to get your finances in order, use credit responsibly and monitor your credit regularly. Don't forget to speak with multiple lenders and shop around.

Refinancing can be a great move if you get a good rate or can pay off your loan sooner -- but consider carefully whether it's the right choice for you at the moment.

When should I refinance?

Most people refinance because the market interest rates are lower than their current rates or because they want to change their loan term.When deciding whether to refinance, be sure to take into account other factors besides market interest rates, including how long you plan to stay in your current home, the length of your loan term and the amount of your monthly payment. And don't forget about fees and closing costs, which can add up.

As interest rates have rather steadily increased since the beginning of the year, the pool of people eligible for refinancing has shrunk significantly. If you bought your house when interest rates were lower than current rates, you may likely not gain any financial benefit from refinancing your mortgage.

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Mortgage underwriting: How long it takes and everything else you need to know

Mortgage underwriting: How long it takes and everything else you need to know

When buying a home, mortgage underwriters evaluate your risk level to help a lender decide if your application should be approved. The mortgage underwriting process happens behind the scenes after you submit a mortgage application. The underwriting decision will ultimately determine if you qualify for a home loan, so it's helpful to understand the process, how to prepare and mistakes to avoid. 

What is mortgage underwriting?

Mortgage underwriting is the part of the homebuying process when a bank assesses your delinquency risk -- that is, how likely you are to be unable to repay a home loan. During the underwriting process, you'll provide financial documents, including pay stubs, bank statements, W-9s, tax returns and profit/loss statements (for self-employed applicants) -- which will help a lender determine your creditworthiness along with your mortgage application. The more favorable your credit profile, the more likely you are to be approved -- and qualify for a lower interest rate.

What is an underwriter? What do they do? 

Underwriters determine an applicant's creditworthiness and ability to pay back the mortgage over a loan's lifetime.

There are two types of underwriters: manual, handled by a real person, and automatic, which is managed by software. In both cases, your delinquency risk is assessed by reviewing your financial information and credit history. Automatic underwriting uses an artificial intelligence-driven computer program to determine your delinquency risk. 

Although automated underwriting is faster, it's less flexible than manual underwriting. A manual underwriter can better account for inconsistent income or an error on a credit report. Some lenders use a combination of manual and automated underwriting to streamline this process.

Who pays for underwriting varies among lenders, but in most cases, the borrower (home buyer) is responsible for paying the underwriting costs during the closing process.

Five steps in the mortgage underwriting process

Step 1: Get prequalified

Before you start looking for a house, you can get prequalified to find out how much of a mortgage you're likely to be approved for. To prequalify you for a home, the lender will run a preliminary review of your financial information to determine if you can get approved for a mortgage. Be prepared to provide the following paperwork for prequalification:

• Government-issued ID
• Bank statements
• Pay stubs
• Prior two years W2s
• Prior two years tax returns
• Social security card

Once you're prequalified, it doesn't necessarily guarantee that you'll be approved for a home loan when you apply. Instead, it allows you to shop for a home within a set budget.

Step 2: Complete your mortgage application

Next, it's time to fill out a mortgage application and get preapproved for your home loan. During this step, you'll need all of the financial documents you provided when getting prequalified. The underwriter will perform a hard credit check and validate the financial information you've provided as part of the mortgage verification process.

Once verification is complete, the lender will issue a preapproval decision. If you're found to be a qualified applicant, your lender will issue a preapproval letter. Mortgage preapproval goes a step further than prequalification. When you're preapproved for a mortgage, the lender approves you for a specific loan amount, as long as your financial picture doesn't change.

Step 3: Make an offer on a home

With your preapproval letter in hand, you're ready to shop until you find the right house for your budget and lifestyle. When you do find the right home, you'll make an offer for the sellers to review. Having a preapproval letter can increase your chances of getting an offer approved quickly. It makes you stand out as a serious buyer since you're more likely to lock in financing.

Step 4: Wait for the appraisal and title search

If your offer is accepted, the lender will order an appraisal of the property. The appraisal helps determine the fair market value of a home and ensures the mortgage amount does not exceed the home's value. It's designed primarily to protect the lender, but it can also protect you from overspending on a house.

If the appraisal comes in for less than the asking price, you may need to search for an alternative property. Typically, the lender will not approve a home loan that exceeds the appraisal value. If the home has an asking price of $300,000, for instance, and appraises for $270,000, you would be responsible for making up the $30,000 difference. Sometimes, if a home appraisal comes in low, the seller will lower the asking price. Just be aware that you may have to walk away from a home that doesn't appraise as expected.

If the appraisal is in line with your offer and the loan amount, the lender will authorize a title search. The title company researches the property's history and ensures no claims exist on the property, such as a current mortgage or lien, pending legal action, restrictions or unpaid taxes. After the search, the title company issues a title insurance policy guaranteeing the search accuracy. Two title policies may be issued: one to protect the lender and sometimes, a separate policy to protect the buyer.

Step 5: The underwriting decision

Once all of the above steps are complete and your application is thoroughly reviewed, the underwriter will issue a judgment. Here are the most common underwriting decisions:

• Approved: You provided all documentation, there are no title issues, and you are approved to receive financing for the mortgage. The next step is to set a settlement or closing date to sign all paperwork and receive the keys to your new home.
• Approved with conditions: The loan is approved, but more documentation is needed. The required documentation could be a gift letter from funds received as down payment, proof of employment verification, letter of explanation or a completed and signed sales contract.
• Denied: The underwriter determined it is too risky to lend to you. This might mean your credit history has negative marks, your income is too low to qualify for the loan amount or your debt-to-income ratio is too high to qualify. Your lender should provide you with the reason for your denial, so you can work on improving any factors that impacted their decision.
• Suspended: The application has been put on hold because more documentation is needed. Once you supply the requested documents, the underwriting process can resume for a final decision.

How long does the underwriting process take? 

The typical underwriting process ranges from a couple of days to several weeks-- though the entire closing process usually takes 45 days. To make sure the process goes smoothly and quickly, respond promptly to any lender requests for information and give a heads up to any references you list (such as an employer) so they will be prepared. Many lenders allow you to check the status of the underwriting process online, so you can be proactive if any documentation is missing.

Mistakes to avoid during the underwriting process:

• Applying for new credit accounts. New credit applications and approvals can affect your DTI and change your credit score, which can impact your mortgage application. 

• Leaving a job. It could make things more complicated if you lose your job (or get a new one) during the homebuying process. If possible, wait until the mortgage process is complete before making any career changes.

• Hiding financial information. If the lender finds significant financial information you've hidden or failed to disclose, it can delay the underwriting process or cause a denial. 

Tips to streamline the mortgage underwriting process:

• Review your credit report: Before you start the mortgage underwriting process, check your credit report to make sure it's accurate and correct any information that is not right. The minimum credit score you'll need varies by the loan type and lender, but generally, you'll need a score of 620 or above to secure financing. A score of 760 or better will help you lock in the best interest rates. Be sure you review the credit requirements for your loan type before applying.
• Have your financial documents ready: Gather all the documents needed and submit them with the application. Check the underwriting status frequently so you can provide additional documents requested by the underwriter.
• Respond to lender inquiries promptly: If the lender or underwriter reaches out, respond quickly and provide any requested information as soon as possible.

Make a larger down payment: The larger your down payment, the better your chances of getting approved for a mortgage loan. A large down payment increases the loan-to-value (LTV) ratio, making you a less risky applicant from an underwriting standpoint.

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APR vs. interest rate: What are the differences?

APR vs. interest rate: What are the differences?

When shopping for a mortgage, car loan or new credit card, you may be presented with an interest rate and an annual percentage rate -- each of which will show you the cost of the loan in a different way. Like with so many seemingly mundane financial details, the real-world implications of these two rates can add up to hundreds or thousands of dollars over time.

Knowing the crucial differences between the interest rate and APR will help you calculate your monthly payment, understand the total cost of a loan and, ultimately, identify the best deal. Here's why understanding how an APR impacts your loan -- especially in the context of a mortgage that can run into the hundreds of thousands of dollars -- is so important.

How interest rates work

An interest rate is the percentage of a loan you'll pay to the lender in exchange for borrowing money. With a mortgage, when you begin making monthly payments, interest is included in your payment. The actual rate you'll pay for a loan depends on a few factors.

Market trends

Interest rates are set by the Federal Open Market Committee (often referred to as "The Fed"), which is made up of representatives from the Federal Reserve. The Fed meets several times per year to discuss the state of the economy and adjust interest rates as needed. The Committee's job is to maintain healthy economic growth while keeping inflation at bay.

Currently, interest rates are at historic lows -- due in part to the coronavirus pandemic, but continuing a trend originating during the 2008 financial crisis. At the end of April 2021, the Fed decided to keep rates close to zero to keep financing as affordable as possible for businesses and individuals during this tough economic time.

Credit score

Your credit score also impacts the interest rate you're offered. Advertised interest rates are usually reserved for borrowers with excellent credit -- traditionally defined as a score of 760 or higher -- and may also include a rate discount for setting up automatic loan payments.

Individuals with a lower credit score (under 760) are usually offered higher interest rates to mitigate the lender's risk of losing money if the borrower defaults on their loan. A low credit score, a history of late payments or collection accounts can impact whether you're approved for a loan. And if you are approved, you'll likely be charged a higher interest rate than a borrower with good-to-excellent credit. 

Most lenders recommend cleaning up your credit and finances before applying for a loan. Improving your credit score by paying down your debts and creating a history of on-time payments could save you thousands of dollars in interest on a mortgage.

For example, look at how a 0.5% difference in interest rates can change the total cost of a $300,000 loan over 30 years. 

• Interest paid at 3.00%: $155,332.36
• Interest paid at 3.50%: $184,968.26

Though the numbers may be smaller for a credit card or car loan, modest differences in interest rates can add up over the years. 

Other costs

In addition to your interest rate, there are other costs included in your home loan. The interest rate may be the most significant factor, but annual fees, closing costs and additional charges may add to the cost of borrowing money. 

How annual percentage rate works

The annual percentage rate is typically higher than an interest rate because it includes all the costs of borrowing money. Some fees that may be incorporated into the APR are:

• Points (one point is equal to 1% of the loan)
• Loan-processing and administrative fees
• Underwriting fee
• Escrow or loan settlement fee
• Private mortgage insurance (for mortgages)
• Document-preparation fee
• Annual fee (for credit cards)

While you may not always be able to negotiate your interest rate, you may be able to negotiate some of the fees included in your APR. The fewer the charges associated with the loan, the lower the APR.

Lenders must legally display their APR

The Truth in Lending Act was enacted in 1968 to make credit cards and loans more transparent, so buyers know what they're comparing -- and signing up for. One of the Act's requirements is that lenders must report APR, which reflects the extra costs of borrowing more accurately. You'll find the APR advertised alongside the interest rate. You can also find it in the Loan Estimate. The interest rate is usually shown on page one under "Loan Terms," and the APR usually appears on page three under the "Comparisons" section.

Fixed vs. variable APR

A fixed APR does not change. But a variable rate APR can fluctuate based on index rate changes, such as the Wall Street Journal's published prime rate. Some variable APRs -- penalty APRs -- can also change as a penalty if you make late payments. 

How loan terms impact APR

The loan terms you choose will also impact the amount of interest and other fees you'll pay over the lifetime of your mortgage. You'll typically be able to make lower monthly payments and pay less monthly interest and fees with a 30-year mortgage than with a 15-year home loan. But, since you'll be making this payment for twice the amount of time, you'll ultimately pay more in interest. Generally, you'll pay less interest and fees overall with a shorter mortgage term.

Here's an example of how a loan term can impact your APR, based on a $250,000 home loan.

How loan term impacts APR

	Option A: 3.25% interest rate, 15 years	Option B: 3.25% interest rate, 30 years	Option C: 3.75% interest rate, 15 years	Option D: 3.75% interest rate, 30 years
Cost of points and fees	$2,500	$2,500	$1,200	$1,200
APR	3.43%	3.35%	3.84%	3.80%
Monthly payment	$1,405.34	$870.41	$1,454.44	$926.23
Total interest paid	$52,960.76	$113,348.55	$61,800.08	$133,443.23

In this example, Option B has the lowest APR -- 3.350% for a 30-year loan term -- and may seem like the best choice at first glance. The monthly payment is the smallest at $870.41, over $500 cheaper per month than Option A. However, because Option B is spread out across 30 years, you'll pay more than double the amount of interest than you would with Option A. 

Interest rate vs. APR: Which one should you use when mortgage shopping?

Bottom line: Interest rates are only part of the picture. When you're shopping for a mortgage or any other type of loan, comparing APR rates across lenders will give you the most accurate and complete view of your costs. A lender could advertise the lowest interest rate yet charge a higher APR, costing you more money in interest in the long term. 

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Mortgage Refinance Rates on Sept. 1, 2022: Rates Rise

Mortgage Refinance Rates on Sept. 1, 2022: Rates Rise

Both 15-year fixed and 30-year fixed refinances saw their mean rates go higher Thursday. The average rates for 10-year fixed refinances also made gains.

Like mortgage rates, refinance rates fluctuate on a daily basis. With inflation at a 40-year high, the Federal Reserve has hiked the federal funds rate four times this year and is poised to do so again in 2022 to try to slow rampant inflation. Though mortgage rates are not set by the central bank, these federal rate hikes increase the cost of borrowing money. Whether refinance rates will continue to rise or fall will depend on what happens next with inflation. If inflation begins to cool, rates will likely follow suit. But if inflation remains high, we could see refinance rates maintain an upward trajectory.

If rates for a refi are currently lower than your existing mortgage rate, you could save money by locking in a rate now. As always, consider your goals and circumstances, and compare rates and fees to find a mortgage lender who can meet your needs.

30-year fixed-rate refinance

The average 30-year fixed refinance rate right now is 5.92%, an increase of 7 basis points over this time last week. (A basis point is equivalent to 0.01%.) One reason to refinance to a 30-year fixed loan from a shorter loan term is to lower your monthly payment. Because of this, a 30-year refinance can be a good idea if you're having trouble making your monthly payments. However, interest rates for a 30-year refinance will typically be higher than rates for a 10- or 15-year refinance. It'll also take you longer to pay off your loan.

15-year fixed-rate refinance

The average 15-year fixed refinance rate right now is 5.19%, an increase of 8 basis points compared to one week ago. A 15-year fixed refinance will most likely raise your monthly payment compared to a 30-year loan. On the other hand, you'll save money on interest, since you'll pay off the loan sooner. You'll also typically get lower interest rates compared to a 30-year loan. This can help you save even more in the long run.

10-year fixed-rate refinance

The average rate for a 10-year fixed refinance loan is currently 5.21%, an increase of 4 basis points over last week. A 10-year refinance will typically feature the highest monthly payment of all refinance terms, but the lowest interest rate. A 10-year refinance can help you pay off your house much faster and save on interest in the long run. However, you should analyze your budget and current financial situation to make sure you'll be able to afford the higher monthly payment.

Where rates are headed

At the start of the pandemic, refinance rates dropped to historic lows, but they have been mostly climbing since the beginning of this year. Refinance rates rose due to inflation, which is at its highest level in four decades, as well as actions taken by the Federal Reserve. The Fed recently raised interest rates by another 0.75 percentage points and is prepared to raise rates again this year to slow the economy. Still, it's unclear exactly what will happen next in the market. If inflation continues to rise, rates are likely to climb. But if inflation starts to cool, rates could level off and begin to decline.

We track refinance rate trends using information collected by Bankrate, which is owned by CNET's parent company. Here's a table with the average refinance rates provided by lenders across the US:

Average refinance interest rates

Product	Rate	A week ago	Change
30-year fixed refi	5.92%	5.85%	+0.07
15-year fixed refi	5.19%	5.11%	+0.08
10-year fixed refi	5.21%	5.17%	+0.04

Rates as of Sept. 1, 2022.

How to find personalized refinance rates

It's important to understand that the rates advertised online may not apply to you. Your interest rate will be influenced by market conditions as well as your credit history and application.

Having a high credit score, a low credit utilization ratio and a history of consistent and on-time payments will generally help you get the best interest rates. You can get a good feel for average interest rates online, but make sure to speak with a mortgage professional in order to see the specific rates you qualify for. To get the best refinance rates, you'll first want to make your application as strong as possible. The best way to improve your credit ratings is to get your finances in order, use credit responsibly and monitor your credit regularly. Don't forget to speak with multiple lenders and shop around.

Refinancing can be a great move if you get a good rate or can pay off your loan sooner -- but consider carefully whether it's the right choice for you at the moment.

When should I refinance?

Most people refinance because the market interest rates are lower than their current rates or because they want to change their loan term. When deciding whether to refinance, be sure to take into account other factors besides market interest rates, including how long you plan to stay in your current home, the length of your loan term and the amount of your monthly payment. And don't forget about fees and closing costs, which can add up.

As interest rates have rather steadily increased since the beginning of the year, the pool of people eligible for refinancing has shrunk significantly. If you bought your house when interest rates were lower than current rates, you may likely not gain any financial benefit from refinancing your mortgage.

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Should You Buy a Home in 2022? Here's What You Need to Know

Should You Buy a Home in 2022? Here's What You Need to Know

This story is part of Recession Help Desk, CNET's coverage of how to make smart money moves in an uncertain economy.

After two years of a wildly hot and competitive housing market with skyrocketing home prices, there are some signs indicating that these record-high spikes might start leveling off. This past April, home price increases declined for the first time in four months, as did sales of new homes. 

But many experts note that, given the ongoing shortage of properties, home prices will still continue to go up in 2022 -- just at a slower pace. Plus, prospective new homeowners have to contend with relatively high mortgage rates, which keep monthly mortgage payments expensive. Although mortgage rates have dropped slightly since the Federal Reserve announced its fourth rate hike of the year to continue combating inflation, they're still more than 2% higher than they were at the beginning of 2022. So homebuyers should expect their mortgage payments to be higher this year, even if lessening demand decreases competition for homes.

"If we've seen the peak in inflation then we have seen the peak in mortgage rates," said Greg McBride, chief financial analyst at CNET's sister site, Bankrate. "The outlook for a weaker economy will hold sway as long as inflation pressures begin to show evidence of easing. If we get a couple months down the road and that hasn't happened, then all bets are off."

Even though mortgage rates appear to be leveling off, when taking all of these factors into account, a homebuyer will now pay almost 47% more for the same property compared with a year ago, according to Realtor.com. 

Buying a home is one of the most important money moves you'll ever make. It's an exceptionally personal decision that requires evaluating your long-term goals while making sure you're financially ready, from the down payment to interest on a home loan. Your job stability, household needs and the inventory available where you want to live all play a role in determining what makes sense for you. 

Here are the most important things to consider when buying a house in 2022, including why it might make sense to wait or to rent instead of buy. 

Key factors to consider when buying a home in 2022

Right now, home prices are still seeing double-digit growth nationwide and all-cash offers still make up around a quarter of housing bids, according to Jessica Lautz, vice president of demographics and behavioral insights at the National Association of Realtors. Does that mean you should try to hold off until prices start going down? Not necessarily.

The first thing to keep in mind is that expert predictions are imperfect. No one knows what's going to happen with the economy, even with warning signs for events like recessions. And timing the market, or trying to make decisions based on what you think will happen to prices or rates in the future, is generally not a sound strategy. "With housing, buyers tend to obsess over home values and how buying at a certain time may be better for appreciation and equity," said Farnoosh Torabi, personal finance expert and editor-at-large at CNET. "That's important, but your monthly housing payment is what really matters in the end."

Even if you have a plan, be prepared to pivot in this market. Maggie Moroney, 27, is trying to buy her first home in the Washington, D.C. area, but can't find anything affordable. Between sales and rentals, there's low inventory in both markets. 

"I probably could try to buy something, but it'd be a little bit of a stretch, especially with interest rates," she said. Moroney doesn't want to rush the decision and plans to wait it out if she doesn't find a home she likes, with the hope that more inventory will start to hit the market. "I'd rather have a rental I'm not super in love with than a home I'm not in love with."

If you're teetering between buying a home and waiting, here are some factors to keep in mind.

1. Mortgage rates and price trends

In today's housing market, high prices along with home loan rates are two of the most important factors at play. Although mortgage rates fluctuate daily, they are expected to remain between 5-6% for the rest 2022 -- though what happens next with inflation will tell where rates are headed. So far, rates are already more than 2 percentage points higher than this time a year ago and passed the 5.5% mark in June, but seem to be evening out since the announcement of the Fed's fourth rate hike in July. 

Although rates dipped slightly with the most recent interest hike, it's still important to understand how the rate you lock in for your mortgage will impact your monthly payments, as well as the total amount you'll pay over the lifetime of your loan. 

For example, if you take out a 30-year fixed-rate mortgage to buy a $500,000 house at a 5.2% interest rate, you'll pay $488,000 in interest over the life of your loan. But if you wait and buy a $450,000 house at a 6.5% interest rate, you'll end up paying $574,000 in interest over the course of your mortgage. So even though you paid less for your home, you're paying more than the difference in price due to interest over three decades. 

Scaling back your budget and looking at homes that may be smaller or in less-expensive neighborhoods is an option to consider if higher mortgage rates have made your previous housing goals unattainable.

2. Financial and personal goals 

Homeownership is still considered one of the most reliable ways to build wealth. When you make monthly mortgage payments, you're building equity in your home that you can tap into later on. When you rent, you aren't investing in your financial future the same way you are when you're paying off a mortgage.

Another factor to take into consideration is how long you plan to live in the house. If you expect to live there for a decade or longer, you'll likely be able to refinance your mortgage to a lower rate, reducing your monthly payment in the process. However, if you plan to move in a few years, it likely won't make financial sense for you to refinance. In that case, it's worth considering an adjustable-rate mortgage, which can help offset today's high mortgage rates by offering you a lower initial interest rate that only adjusts or increases later on in your mortgage term.

3. Future housing trends and recession risks

As buyer competition decreases when buying a home becomes increasingly unaffordable, it could mean that inventory opens up where you're looking. In June, the national inventory of available homes grew by 18.7% this year compared to last year. More available inventory means that you have more homes to choose from, increasing the chances you can buy something you actually want this year versus scrambling in a bidding war for whatever is available in your budget.

But there's also talk of a looming recession. If you wait to buy instead, you could avoid potentially overpaying for a home that could lose its value in an upcoming economic downturn, said Torabi. Plus, if the economy slows down, it's possible the Federal Reserve will raise interest rates less aggressively, which could benefit potential homeowners trying to lock in a better rate on their mortgage. 

Is it better to rent than buy right now? 

It depends, especially when we're dealing with an unpredictable period of high inflation. 

On one hand, if you buy a house and secure a fixed-rate mortgage, that means that no matter how much prices or interest rates go up, your fixed payment will stay the same every month. That's an advantage over renting since there's a good chance your landlord will raise your rent to counter inflationary pressures. Right now, rents are rising faster than wages, and if homebuyers are priced out of the housing market, there'll be more pressure to rent, which will increase competition. Many are already experiencing a red-hot rental market, leading to rental bidding wars and evictions. 

On the other hand, even though a fixed-rate mortgage can offer you more predictability and budget stability, "as long as inflation continues to outpace wages, there could be benefits to renting right now as the economy worsens," said Torabi. 

For example, one advantage of renting over buying is that you can save the cash you would have otherwise needed to use for a down payment. In a time of economic uncertainty, if you don't have to worry about coming up with a down payment and emptying most of your entire bank account to secure yourself a home, you can stay more liquid. Having more cash on hand can offer you added security if a recession negatively impacts your financial situation.

"It's important to know the differences in cost of owning a home versus the cost of renting," said Robert Heck, vice president of mortgages at Morty, an online mortgage marketplace. "How much is homeowners insurance going to cost? How much are the annual property taxes? Maybe you're not used to paying property taxes if you've been renting. Consider the costs that will go into maintaining a home."

Ultimately, whether you rent or buy often comes down to practical considerations like whether you need more space to start a family, or your lease is ending -- regardless of market conditions.

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8 Ways to Protect Your Money During a Recession

8 Ways to Protect Your Money During a Recession

This story is part of Recession Help Desk, CNET's coverage of how to make smart money moves in an uncertain economy.

What's happening

With the latest GDP report showing another consecutive quarterly decline in economic activity, the country is likely in a technical recession.

Why it matters

Previous recessions have all seen pervasive layoffs, higher costs of borrowing and a tumultuous stock market.

What it means for you

Worry less about the macroeconomic news of the day and focus on what you can control. Take inventory of your financial life, gather facts and make moves to protect your savings.

While many economists still refuse to use the R-word, the warning signs indicate the US economy is now likely in a technical recession. In addition to another quarterly drop in GDP, or gross domestic product, consumer confidence has gone down, the stock market is in bear territory and inflation is still soaring, despite four interest rates hikes from the Federal Reserve.

An increase in layoffs -- another key indicator of a recession -- is also being felt across the country as many companies, particularly in the tech sector, have announced layoffs in recent months. And if you ask most people, they'll say it's become undoubtedly harder to make ends meet. At least one poll conducted in June finds a majority of Americans, or 58%, believe we are in a recession.

But then others point to some key factors that point in the opposite direction -- for example, low unemployment levels, rising spending and a healthy banking sector.

While the National Bureau of Economic Research makes the official call on a recession -- and so far it's remained tight-lipped -- whether we call this challenging financial period a recession or not seems like a pretty subjective matter of interpretation. 

At CNET Money, we're dedicated to supporting your financial health with accurate, timely and honest advice that takes into consideration the pressing financial questions of our time. That's why we're launching the Recession Help Desk, a destination where you will get the latest, best advice and action steps for navigating this uncertain period. 

First, a quick look back at the US economy

Since the Great Depression, the US has had about a dozen economic setback periods lasting anywhere from a few months to over a year. In some ways, there's always a recession on the horizon: Economies are cyclical, with upswings and downturns. We can't predict what will happen in advance, and sometimes we can't even tell what's happening while we're in the middle of it. Morgan Housel, author of The Psychology of Money, may have said it best when he tweeted back in April: "We're definitely heading toward a recession. The only thing that's uncertain is the timing, location, duration, magnitude and policy response." 

Attempting to figure out recession specifics is a guessing game. Anyone who tells you different is likely trying to sell you something. The best we can do right now is draw on history to build context, get more proactive about the money moves we can control and resist the urge to panic. This includes reviewing what happened in previous recessions and taking a closer look at our financial goals to see what levers to pull to stay on track. 

Here are eight specific steps you can take to create more financial stability and resilience in a turbulent economy. 

Read more:  Bear Markets: Expert Stock Market Advice for Investors

1. Plan more, panic less   

The silver lining to current recession predictions is that they're still only forecasts. There is time to assemble a plan without the real pressures and challenges that come with being in the thick of an economic slowdown. Over the next couple of months, review your financial plan and map out some worst-case scenarios when your adrenaline isn't running high. 

Some questions to consider: If you did lose your job later this year or in early 2023, what would be your plan? How can you fortify your finances now to weather a layoff? (Keep reading for related advice.)

2. Bulk up your cash reserves 

A key to navigating a recession relatively unscathed is having cash in the bank. The steep 10% unemployment rate during the Great Recession in 2009 taught us this. On average, it took eight to nine months for those affected to land on their feet. Those fortunate to have robust emergency accounts were able to continue paying their housing costs and buy time to figure out next steps with less stress. 

Consider retooling your budget to allocate more into savings now to hit closer to the recommended six- to nine-month rainy day reserve. It may make sense to unplug from recurring subscriptions, but a better strategy that won't feel as depriving may be to call billers (from utility companies to cable to car insurance) and ask for discounts and promotions. Speak specifically with customer retention departments to see what offers they can extend to keep you from canceling your plans.

3. Seek a second income stream

Web searches for "side hustles" are always popular, but especially now, as many look to diversify income streams in the run up to a potential recession. Just like it helps to diversify investments, diversifying income streams can reduce the income volatility that arrives with job loss. For inspiration on easy, low-lift side hustles that you might be able to do from home, check out my story.

4. Resist impulsive investing moves

It's hard not to be worried about your portfolio after all the red arrows in the stock market this year. If you have more than 10 or 15 years until retirement, history proves it's better to stick with the market ups and downs. According to Fidelity, those who stayed invested in target-date funds, which include mutual funds and ETFs commonly tied to a retirement date, during the 2008 to 2009 financial crisis had higher account balances by 2011 than those who reduced or halted their contributions. "Those who panic and sell 'at the bottom' often regret it because trying to time the market can result in losses that are very difficult to regain because stock prices can change quickly," said Linda Davis Taylor, seasoned investment professional and author of The Business of Family. 

If you have yet to sign up for automatic rebalancing, definitely look into this with your portfolio manager or online broker. This feature can ensure that your instruments remain properly weighted and aligned with your risk tolerance and investment goals, even as the market swings. 

5. Lock interest rates now

As the policy makers raise interest rates to bring down inflation levels, interest rates will increase. This potentially spells bad news for anyone with an adjustable-rate loan. It's also a challenge for those carrying a balance on a credit card.

While federal student loan borrowers don't have to worry about their rates going up, those with private variable rate loans may want to look into consolidating or refinancing options through an existing lender or other banks, such as SoFi, that could consolidate the debt into one fixed-rate loan. This will prevent your monthly payments from increasing unpredictably when the Federal Reserve raises interest rates again this year, as expected.

6. Protect your credit score  

Borrowers may have a tougher time accessing credit in recessions, as interest rates jump and banks enforce stricter lending rules. To qualify for the best loan terms and rates, aim for a strong credit score in the 700s or higher. You can typically check your credit score for free through your existing bank or lender, and you can also receive free weekly credit reports from each of the three main credit bureaus through the end of the year from AnnualCreditReport.com. 

To improve your credit score, work towards paying down high balances, review and dispute any errors that may be on your credit report or consider consolidating high-interest credit card debt into a lower interest debt consolidation loan or 0% introductory APR balance transfer card.

7. Rethink buying a home

While home prices have cooled in some areas, it remains a competitive housing market with few homes to go around. If rising mortgage rates are adding more pressure to your ability to buy a home within budget, consider renting for a little longer. If you're also worried about your job security in a potential recession, then that's even more reason to take pause. Leasing isn't cheap at the moment, but it can afford you more flexibility and mobility. Without the need to park cash for a down payment and closing costs, renting can also keep you more liquid during a potentially challenging economy.

8. Take care of your valuables

The advice that was born out of the sky-high inflation period in the late 1970s still applies now: "If it ain't broke, don't fix it." 

With ongoing supply chain issues, many of us face high prices and delays in acquiring new cars, tech products, furniture, home materials and even contact lenses. This includes replacement parts, too. If a product comes with a free warranty, be sure to sign up. And if it's a nominal fee to extend the insurance, it may be worth it during a time when prices are on the rise.

For example, my car has been in the repair shop for over three months, waiting for parts to arrive from overseas. So, in addition to paying my monthly car payment, I have a rental car fee that's adding up. If nothing else, I'll be heading into a possible recession a more cautious driver.

Read more: Smaller Packages, Same Prices: Shrinkflation Is Sneaky

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Mortgage Refinance Rates on Sept. 1, 2022: Rates Rise

Mortgage Refinance Rates on Sept. 1, 2022: Rates Rise

Both 15-year fixed and 30-year fixed refinances saw their mean rates go higher Thursday. The average rates for 10-year fixed refinances also made gains.

Like mortgage rates, refinance rates fluctuate on a daily basis. With inflation at a 40-year high, the Federal Reserve has hiked the federal funds rate four times this year and is poised to do so again in 2022 to try to slow rampant inflation. Though mortgage rates are not set by the central bank, these federal rate hikes increase the cost of borrowing money. Whether refinance rates will continue to rise or fall will depend on what happens next with inflation. If inflation begins to cool, rates will likely follow suit. But if inflation remains high, we could see refinance rates maintain an upward trajectory.

If rates for a refi are currently lower than your existing mortgage rate, you could save money by locking in a rate now. As always, consider your goals and circumstances, and compare rates and fees to find a mortgage lender who can meet your needs.

30-year fixed-rate refinance

The average 30-year fixed refinance rate right now is 5.92%, an increase of 7 basis points over this time last week. (A basis point is equivalent to 0.01%.) One reason to refinance to a 30-year fixed loan from a shorter loan term is to lower your monthly payment. Because of this, a 30-year refinance can be a good idea if you're having trouble making your monthly payments. However, interest rates for a 30-year refinance will typically be higher than rates for a 10- or 15-year refinance. It'll also take you longer to pay off your loan.

15-year fixed-rate refinance

The average 15-year fixed refinance rate right now is 5.19%, an increase of 8 basis points compared to one week ago. A 15-year fixed refinance will most likely raise your monthly payment compared to a 30-year loan. On the other hand, you'll save money on interest, since you'll pay off the loan sooner. You'll also typically get lower interest rates compared to a 30-year loan. This can help you save even more in the long run.

10-year fixed-rate refinance

The average rate for a 10-year fixed refinance loan is currently 5.21%, an increase of 4 basis points over last week. A 10-year refinance will typically feature the highest monthly payment of all refinance terms, but the lowest interest rate. A 10-year refinance can help you pay off your house much faster and save on interest in the long run. However, you should analyze your budget and current financial situation to make sure you'll be able to afford the higher monthly payment.

Where rates are headed

At the start of the pandemic, refinance rates dropped to historic lows, but they have been mostly climbing since the beginning of this year. Refinance rates rose due to inflation, which is at its highest level in four decades, as well as actions taken by the Federal Reserve. The Fed recently raised interest rates by another 0.75 percentage points and is prepared to raise rates again this year to slow the economy. Still, it's unclear exactly what will happen next in the market. If inflation continues to rise, rates are likely to climb. But if inflation starts to cool, rates could level off and begin to decline.

We track refinance rate trends using information collected by Bankrate, which is owned by CNET's parent company. Here's a table with the average refinance rates provided by lenders across the US:

Average refinance interest rates

Product	Rate	A week ago	Change
30-year fixed refi	5.92%	5.85%	+0.07
15-year fixed refi	5.19%	5.11%	+0.08
10-year fixed refi	5.21%	5.17%	+0.04

Rates as of Sept. 1, 2022.

How to find personalized refinance rates

It's important to understand that the rates advertised online may not apply to you. Your interest rate will be influenced by market conditions as well as your credit history and application.

Having a high credit score, a low credit utilization ratio and a history of consistent and on-time payments will generally help you get the best interest rates. You can get a good feel for average interest rates online, but make sure to speak with a mortgage professional in order to see the specific rates you qualify for. To get the best refinance rates, you'll first want to make your application as strong as possible. The best way to improve your credit ratings is to get your finances in order, use credit responsibly and monitor your credit regularly. Don't forget to speak with multiple lenders and shop around.

Refinancing can be a great move if you get a good rate or can pay off your loan sooner -- but consider carefully whether it's the right choice for you at the moment.

When should I refinance?

Most people refinance because the market interest rates are lower than their current rates or because they want to change their loan term. When deciding whether to refinance, be sure to take into account other factors besides market interest rates, including how long you plan to stay in your current home, the length of your loan term and the amount of your monthly payment. And don't forget about fees and closing costs, which can add up.

As interest rates have rather steadily increased since the beginning of the year, the pool of people eligible for refinancing has shrunk significantly. If you bought your house when interest rates were lower than current rates, you may likely not gain any financial benefit from refinancing your mortgage.

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What Are Affirm, Afterpay, Klarna and PayPal Pay in 4? How 'Buy Now, Pay Later' Plans Work

What Are Affirm, Afterpay, Klarna and PayPal Pay in 4? How 'Buy Now, Pay Later' Plans Work

How many times have you added items to your online shopping cart only to balk at the total? While staying within your budget is wise, if you need to make a purchase that you're considering charging or borrowing money for, a "buy now, pay later" service might be a smarter option.

BNPL companies like Affirm, AfterPay, Klarna and PayPal Pay in 4 work by offering you micro installment loans. This loan covers the cost of your purchase right away, and lets you repay the balance over time. These services have gained traction since the pandemic and today AfterPay has more than 16 million active users, followed by Affirm's 8.7 million, most of whom are millennials and Gen Z shoppers.

But what exactly are these installment plans and how are they different from credit cards and personal loans? Here's the breakdown of these alternative financing options and how to use them.

What are installment services?

If you've ever bought a car, a home or an education, you've probably used an installment loan. Installment loans are lump-sum loans that you pay off over a set amount of months or years. For products like cars and homes, they're often funded by well-known banks, like Chase or Wells Fargo. 

Mini installment plans from companies like AfterPay and Affirm act like microloans for everyday purchases, like clothes, makeup, electronics and gym equipment (like Peloton). Affirm, for example, also supports unexpected purchases, like car repairs through YourMechanic. But unlike new car or home purchase loans, which you typically pay off over the course of many years, products and services financed through these services are typically paid off in a few weeks or months. 

How do they work?

Each online installment plan offers different setups, but the gist is: You buy your item now, select the plan at checkout with a qualifying retailer, create an account and complete your purchase. With Klarna and AfterPay, you get your goods right away and then pay for them over four installment payments: one when you check out and typically every other week or once a month thereafter. Affirm has payment options that usually range from three to 12 months, although some plans have terms as high as 48 months.

For AfterPay, as long as you make your four payments, you won't get charged late fees. Klarna has different payment options and some of them charge interest. Affirm charges 0 to 30% interest depending on your payment plan.

To take advantage of an interest-free installment plan, you need to shop with retailers that support it. Anthropologie, DSW and Fenty Beauty are AfterPay partners, for example. You might see the installment service's logo when you're viewing a product, letting you know the partnership exists and you can select a payment plan at checkout. From there, you'll usually pay the first installment and the next one will come out about two weeks later. Otherwise, the product or service will arrive on time, just like it would if you paid in full at checkout.

You can also shop through each company's app. Affirm, AfterPay, PayPal and Klarna all have apps in the App Store and Google Play that let you shop, monitor your orders and make payments. 

While they aren't like traditional loans, they're different from other types of alternative payment methods. For instance:

• They aren't credit cards. A credit card is a revolving credit line that you get approved for. You use your card to pay for your purchase in full and then at the end of the billing period you'll pay off your bill or make payments until you pay it off in full. Typically, if you don't pay your balance off at the end of the billing period, interest will accrue, which can be 20% or more. CNET always recommends paying off your credit in full. 
• They aren't the same as layaway. Layaway is when you agree to pay off an item over the course of a few months and once you've paid it off, you can take it home. Layaway usually requires an upfront deposit and a service fee, and you don't get your goods until you've paid for them in full. Some installment plan companies require an upfront deposit, but you don't have to wait to get your item; you get it right away.

How does an installment service affect my credit score?

When you apply for a loan or a credit card, that hard credit check looks at your credit history to see if you're responsible enough with credit to lend to. With BNPL apps, there's no hard credit inquiry. If the app checks your credit, it'll be a soft credit check, which won't hurt your credit score. The services don't specify the credit score you need to shop with them.

If you aren't diligent with payments, your credit score might be affected. For most micro installment loans, you're required to make payments about every two weeks and in four total installments. So if you don't pay your bill on time, that triggers a late payment for some companies. The three major credit bureaus will get notified and you could see your credit score take a dip. Late payments are one of the biggest factors in determining your credit score, and a drop in that could hurt your chances of borrowing money in the future.

Penalties and fees vary by company. Affirm and PayPal do not charge late fees. AfterPay does, though these fees will not exceed 25% of the purchase amount. Klarna doesn't charge a late fee but if you don't make a payment when it's due, you can be blocked from using the site and app in the future. None of these services charge prepayment fees, so you won't get penalized for repaying your balance sooner.

Should I use BNPL services?

It depends on what kind of shopper you are and your mentality about money. Here are some pros and cons to consider:

Pros

• You can buy items and services, even if you can't afford them right away:If you have things you need or want to buy, you're not obligated to pay full price at checkout. Micro installment loans let you pay out your purchase over a few weeks.
• You don't need great credit to get approved:Most services do a soft credit check, which won't hurt your credit score . If you don't have great credit or a long credit history, this is a good alternative payment option.
• It's simpler than a loan or credit card:If you've had trouble with credit cards or don't like using them, this is an easier method than applying for a credit card or personal loan. You can apply at checkout, whereas if you want a credit card or loan, you'll need to wait a few days before you can use those funds.

Cons

• You might believe you're spending less:If you cringe at a $1,000 couch, seeing payments broken up into $250 every other week, for example, tricks you into believing you're paying less for an item. In reality, you're still paying the same amount and you're borrowing money to do it.
• You may be charged interest or other fees: Depending on the service you choose and the repayment plan you select, you could be charged interest. Affirm, for instance, offers interest rates between 0% and 30%. While this interest does not compound like a credit card, spreading payments for that $1,000 couch over 12 months at a 30% interest rate could end up costing you $169.76 in interest alone. 
• You might not get approved for the full amount: Your credit score may not preclude you from getting approved for a BNPL loan, but it's still a factor when determining your loan amount and interest rate (if applicable). That means, there's a chance you might not get approved for the full amount you're requesting. 
• It's still a loan:Remember you're still taking out a loan, even if you pay it off sooner than you would a traditional loan. Not paying on time could result in interest fees, late payment fees or not being able to use the service in the future.
  

While the convenience of delayed payment sounds appealing as a way to get something now, you're still on the hook for paying your bill in full. If you need something now but can't afford it, micro installment loans might be a good idea. But if you don't think you'll be able to afford payments, you may want to consider another payment method or waiting until you have cash on hand to make your purchase.

Correction, April 30: Affirm has 8.7 million users, more than we previously quoted. It also has repayment options ranging from three to 12 months, a shorter period than previously listed. Clarified that AfterPay does not charge late fees as long as you make four payments.

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Mortgage forbearance and eviction extensions run through September 2021

Mortgage forbearance and eviction extensions run through September 2021

In addition to its vast human toll, the pandemic has ravaged the financial resources of millions of US homeowners. Since the Coronavirus Aid, Relief, and Economic Security Act passed last year, more than 9 million Americans hit pause on making monthly mortgage payments, entering what's technically referred to as a "forbearance." 

But there are hundreds of thousands of additional homeowners who may qualify for relief. A 2020 Urban Institute survey found that approximately 530,000 delinquent homeowners had not requested forbearance relief -- despite being eligible. 

Why? A National Housing Resource Center survey from last year suggested that homeowners may have feared having to make a significant lump-sum payment at the end of forbearance -- it's actually just one of many options -- or simply not known about the program. Others may have had difficulty connecting with their loan servicer. 

The CARES Act's homeowner protections were set to expire at the end of June 2021. But the US Federal Housing Administration has announced revisions to measures for struggling homeowners. Highlights include:

• An end to the foreclosure moratorium on single-family foreclosures on July 31
• A moratorium on single-family eviction extended from July 31 to Sept. 30, 2021
• An extension of the deadline to request mortgage forbearance from June 30 to Sept. 30, 2021
• The extension of a program to help homeowners reduce monthly mortgage payments by 25% or more

Whether you've already resumed making mortgage payments, are still in forbearance or are in danger of defaulting on your loan, there are new protections for homeowners like you. Read on to learn everything you need to know about mortgage forbearance and the new extensions. 

What is forbearance protection?

Entering into forbearance allows you to hit pause on making your monthly mortgage payment. The missed payments go into a separate loan bucket if you have a federally backed loan or move to the end of your mortgage with Fannie Mae or Freddie Mac. In both cases, forbearance has a 0% interest rate, no fees and is repayable when you refinance, sell or when the mortgage term ends. A few other important things to know:

• Accepting forbearance assistance won't hurt your credit score. If your account is current when you enter forbearance, your loan servicer cannot report a pause in payments as "delinquent" to the credit reporting agencies. If you're behind on your mortgage when you enter forbearance, your loan servicer cannot report your account as more delinquent while your forbearance period is active. You can find additional information about this from the Consumer Financial Protection Bureau. 
• You will not be required to repay your missed payments in a lump sum. 
• Legal proceedings like foreclosure are suspended.

The US Department of Housing and Urban Development offers resources to help you navigate the process. "HUD has a website to help you find a housing counselor near you for people who need that resource individually," said Alanna McCargo, a HUD Senior Advisor for Housing Finance. "If they don't feel like they have enough information, a local housing counselor will work with them and the servicer to get them into the right space."

What are my options?

On June 25, the US Federal Housing Administration announced forbearance relief options. If you're struggling to pay your mortgage, here's an updated overview of what you can do.

Request forbearance

The new guidelines have extended the deadline for first-time COVID-19 forbearance requests. Homeowners who have not previously been in forbearance can now request assistance until Sept. 30, 2021. The table below summarizes your options based on the forbearance period start date. (If you aren't sure who owns your loan, you can look it up using the Mortgage Electronic Registration Systems website.)

FHA COVID-19 forbearance periods (updated June 25, 2021)

Initial forbearance date	First forbearance period	Second forbearance period	Third forbearance period	Maximum forbearance period
March 1, 2020 to June 30, 2020	Up to 6 months	Up to 6 months	Up to 6 months (in 3-month increments)	Up to 18 months
July 1, 2020 to Sept. 30, 2020	Up to 6 months	Up to 6 months	Up to 3 months	Up to 15 months
Oct. 1, 2020 to June 30, 2021	Up to 6 months	Up to 6 months	None	Up to 12 months
July 1, 2021 to Sept. 30, 2021	Up to 6 months	None	None	Up to 6 months

Extend existing forbearance

Depending on your loan servicer and how long you've been in forbearance, you may qualify for an extension to help you get back on your feet. The table above lists your choices, and if you don't see an option that works for your situation, McCargo urges homeowners to reach out to HUD or a housing counselor.

"The nature of the pandemic, because it's impacted people in so many different ways, has streamlined opportunities for people that are delinquent on their FHA mortgages," she said. "This administration has been really focused on making sure that we can do everything in our power to keep people in their homes, especially since people have a lot of home equity and, therefore, their wealth tied up in property. It's their livelihoods, and so it's really important to try to do what we can to work with folks." 

Request a reduced monthly mortgage payment amount

If you are ready to exit forbearance but your monthly payment is still too high, modifying your loan term could help you find an affordable solution.

For FHA loans, the COVID-19 Advance Loan Modification (aka COVID-19 ALM) program is available to reduce monthly mortgage principal and interest payments by up to 25%. ALM requires loan servicers to review eligible borrowers' accounts within 30 days of the expiration of the forbearance period. Better still, you aren't required to contact your servicer to begin this process, but you will need to sign a modification offer from them to officially change your mortgage terms. You can find more details about COVID-19 ALM process here. 

If Fannie Mae or Freddie Mac services your loan, there are also ways to lower your monthly payment. "Since every lender and servicer is different, the best way to find out what options exist is to reach out to your bank and ask," said Brandon Howland, a loan officer at 1st Security Bank in Everett, Washington. "For clients in forbearance who are looking to refinance, I advise them to start making on-time payments as soon as possible if that is their goal." 

For clients who don't qualify for loan refinancing, Howland recommends loan deferral. "[The bank] essentially takes the delinquent amount and moves it to a second mortgage lump sum and attaches it to the original mortgage," he said. "It would bring the loan current, and then when the client sells or refinances, they would just have to add this amount to be paid, just like if it was a cash-out refinance to pay off a car loan, for example."

New changes to foreclosure and eviction protections for homeowners 

In addition to extending forbearance provisions, the Biden administration extended the moratoriums on foreclosures and evictions to July 31, 2021. Mortgages covered under the extended protections included:

• All FHA-insured single-family mortgages and home equity conversion (reverse) mortgages. Vacant or abandoned properties do not qualify. 
• Multifamily FHA mortgages that have been current on payments as of Feb. 1, 2020
• All Fannie Mae and Freddie Mac-owned single-family mortgages 
• FHA, Fannie Mae or Freddie Mac-owned real estate owned properties acquired by private mortgage lenders through foreclosure or deed-in-lieu of foreclosure transactions.
• USDA Multifamily Housing Communities

On July 30, the FHA acknowledged an end to the foreclosure moratorium, but extended the eviction moratorium to Sept. 30, 2021. Under federal law, a servicer cannot foreclose your home unless your mortgage is more than 120 days past due. There can be exceptions depending on your forbearance terms or if you enrolled in a "loss mitigation program." Although the rules vary by state, a servicer usually must notify a borrower before they begin foreclosure proceedings.

If you're facing foreclosure or eviction, contact your housing counselor to help you work with your loan servicer. You can also contact the CFPB, which can help you find an affordable or no-cost attorney in your area. 

What happens when my forbearance period ends? 

At least 30 days before your final forbearance period ends, your loan servicer will contact you to discuss next steps. If you have additional forbearance periods available, you will need to reach out to your servicer to request an extension. If you have exhausted your forbearance options, your servicer will help you choose an exit strategy. 

Note: Don't forget to request everything in writing to make sure you understand the new terms of your mortgage. You may also want to review the agreement with your housing counselor or attorney.

What are my repayment options? 

Your options for exiting forbearance depend on the type of mortgage you have and your financial stability. Options across all loan types are below.

Option for Exiting Covid-19 Forbearance

Option	Situation	How it works
Repayment plan	You can afford to pay more than your regular mortgage amount.	A portion of the forbearance amount you owe is paid monthly with your mortgage.
Deferral	You can pay your regular monthly mortgage amount but can't afford to increase it.	The unpaid forbearance amount is moved to the end of your loan and repaid when you refinance, sell or the mortgage term ends.
Partial claim	You can pay your regular monthly mortgage amount but can't afford to increase it.	This will either move your missed payments to the end of your loan or put them into an interest-free second mortgage called a COVID-19 Standalone Partial Claim, repayable only when you refinance, sell or the mortgage term ends.
Modification	You can't afford to pay your regular monthly mortgage amount.	Your mortgage and missed payments are combined and reduced to an affordable monthly amount. Lower payments mean it will take longer to pay off your loan.
Lump-sum reinstatement	You want to pay back all of your missed payments at once.	Most loan servicers can't require you to make a lump-sum payment, but it's an option if you choose to do so.

Special provisions for federally backed loans

Note that the FHA, USDA and the Department of Veterans Affairs do not require a lump sum repayment when forbearance ends. In addition, homeowners with VA loans may qualify for further COVID-19 assistance as the Biden administration conducts ongoing evaluations of veterans' vulnerability. Here's a partial list of loan service agencies that may provide more information:

If your loan isn't backed by a federal agency, call your servicer directly to learn about your options. Be sure to ask about loan terms, fees and interest rates -- and, as always, request written copies to review before signing a new mortgage agreement or modification.

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