If you’re having trouble making your monthly mortgage payments, you may be eligible for mortgage forbearance from your lender. Here’s what you need to know.
What Is Mortgage Forbearance?
Mortgage forbearance is an agreement between you and your mortgage company to reduce or pause your mortgage payments for a limited time.
How Does Mortgage Forbearance Work?
Losing your home to foreclosure is terrible. Not only is your housing situation disrupted, but you also lose any equity you have in your home. And your credit score will be severely affected as well.
This is where mortgage forbearance comes in. Through forbearance, you can work with your lender to temporarily pause or reduce your monthly mortgage payments. To qualify, you need to show you are experiencing a hardship that makes it difficult to stay current on your mortgage.
You cannot put off your mortgage payments forever, however. Lenders typically have some hard limit on how long they will allow a borrower’s mortgage forbearance period to last.
Mortgage forbearance is not mortgage forgiveness. Though you will have a reprieve from making payments, you will still be responsible for making them. Exactly how you will make them up will depend on your arrangement with your lender.
Common repayment options include:
- Making double payments every month until the missed payments are made up
- Increasing the amount of your monthly payment
- Extending your mortgage period while keeping your monthly payment amount the same
- Modifying your mortgage in some other way
Who Is Eligible for Mortgage Forbearance?
Typically, to qualify for mortgage forbearance, you need to show you are experiencing a hardship or life event that is negatively affecting your cash flow to the point you are unable to make your monthly mortgage payments.
How to Get Mortgage Forbearance
To get mortgage forbearance, you should first contact your lender to let them know you are having difficulties making your mortgage payments and ask what forbearance options are available to you.
Make sure you understand your lender’s options in full. For example, if you are approved for forbearance, it’s important to understand:
- How long your forbearance period will last
- Whether you can completely pause your mortgage payments or merely reduce them during the forbearance period
- How you will be expected to pay back the mortgage payments you missed in your forbearance period
If you want to move forward with obtaining mortgage forbearance, your lender will likely send you an application to complete and submit back to them, along with supporting documents such as proof of your monthly income (such as pay stubs) and proof of other monthly debt service payments (such as car loan and credit card statements).
If your lender approves your application, they will send you a document outlining your forbearance plan’s terms. It is important that you read and understand this document to ensure that it is consistent with your original understanding of how your mortgage forbearance would work.
Finally, at the end of your mortgage forbearance period, you will need to resume making your monthly mortgage payments and work toward making up for your missed mortgage payments according to the terms of your forbearance.
Is Mortgage Forbearance Right For You?
While mortgage forbearance can get you out of a difficult situation—at least in the short term—it’s not the only option available to you if you are having trouble making your mortgage payments.
Although easier said than done, consider examining ways to either increase your income or decrease your expenses to stay current with your lender.
Also, be sure to determine if you can obtain forbearance or some other modification of your other debts, such as student loans, that will eliminate or reduce your monthly payment. It’s possible that the terms offered by other lenders may be better for your financial situation than obtaining forbearance through your mortgage lender.
The best thing you can do right now is understand what exactly your lender can do for you. That starts with reaching out to them and asking about your options.
Then, you can compare them to other possible solutions to your cash crunch to determine the best way forward.
This article is intended for general informational and educational purposes only, and should not be construed as financial or tax advice. For more information about whether a reverse mortgage may be right for you, you should consult an independent financial advisor. For tax advice, please consult a tax professional.