A third of people who delayed mortgage payments in pandemic used cash for groceries, utilities
One of the lifelines for homeowners during the COVID-19 pandemic has been forbearance, an ability to skip or make smaller monthly payments on mortgages under the CARES Act, leaving them more cash for emergencies.
Still, the majority of people who went into forbearance remain stressed about getting — and staying — on track with mortgage payments, according to the results of a survey done for Credit Karma, a financial technology company with more than 100 million customers.
About 2.2 million homeowners had entered forbearance plans as of April 25, according to the Mortgage Bankers Association. In May 2020, more than 4 million U.S. mortgages were in forbearance.
Of those surveyed who were in forbearance, 59% said they felt that their financial stability depended on being able to delay their mortgage payments, and 62% said they felt stressed about the payments they eventually would need to make toward their mortgage in the future.
While in forbearance, 34% said they spent the cash that would have gone toward their mortgages on other essentials — like groceries, medical payments, utilities and additional expenses incurred throughout the pandemic, such as homeschooling equipment and caring for family members.
Close to 32% said they saved the money by putting it toward an emergency fund or a general savings account, 21% said they used the cash to pay down debts like student loans or credit cards, and 13% said they didn’t have any extra money even while in forbearance.
“Forbearance is a double-edged sword,” says Andy Taylor, general manager for Credit Karma Home. “It’s great because it allowed people to stay in their homes. It allowed them to save the money for necessities like groceries, medical attention or even to pay down debts. But it does come at a cost: Namely, at the end of your forbearance period, you will have to pay that back.”
The results are based on a national online survey in April among 1,033 adults conducted by Qualtrics on behalf of Credit Karma.
About 20% of the homeowners in the survey said they tapped a line of credit based on their home equity — what the home is worth minus what is owed on the mortgage — in the past 12 months. Of those, 41% said they used the money on home renovations.
“Last year, homeowners with mortgages saw their equity increase by 11%, fundamentally because home values went up pretty significantly in 2020,” Taylor says.