In the case of a natural disaster, some lenders might require that you apply for a forbearance within a certain period of time. There are also national, state and local programs designed to help homeowners in crisis, such as the Hardest Hit Fund, which was established after the 2007 housing crisis and operates in 18 states and the District of Columbia. They can give you information about programs you might be eligible for, as well as their specific rules and qualifications. The Consumer Financial Protection Bureau website can help you locate a housing counselor.Ĭontact your lender or servicer, as well. A housing counselor should help you understand what your rights are and the relief options available to you. If you think a mortgage forbearance is right for you, research your options. In this scenario, you would pay an extra $1,500 per month for 12 months on top of your regular monthly mortgage payment. If you owe $18,000 in mortgage payments, you can break up that large amount by paying it over 12 months. The third common option is to divide how much you owe by a certain amount of time and make monthly payments until it’s paid off. In this scenario, you would simply resume normal monthly payments when the forbearance period ends. If you have 15 years left on your mortgage and you pause your payments for three months, you would add the extra months to the end of your term, so you would have 15 years and three months left to pay off your mortgage. A second common repayment option is to extend the term of your loan. However, if you’re expecting a windfall at the end of your forbearance (perhaps through investment income or an employment bonus), a lump-sum payment might be doable. This could be challenging for people facing financial hardships. If your monthly payments were $3,000 and you paused them for six months, you would owe $18,000 at the end of your forbearance. Once the forbearance period ends, you would owe the total sum (principal and accrued interest) in one payment.
There’s no one-size-fits-all option, so it’s important to talk to your lender about what’s possible for your situation. For example, if your monthly payments are $2,000, your lender might reduce it to $1,000 for six months.Īs forbearance plans differ by individual lenders and loan types, the same applies to repaying your forbearance. A reduction in mortgage payments means that your lender cuts how much you owe each month by a certain percentage that’s affordable to you for a set amount of time. During this period interest will usually accrue on missed payments until they’re repaid. This period can be a few months or longer, depending on your circumstances. A pause in payments means that you can stop paying your monthly mortgage payments for a specified period. The two common types of forbearance plans include: The length and terms of a mortgage forbearance differ by the type of loan you have, your servicer or lender and your circumstances. There is no one type of forbearance plan. Homes damaged or destroyed in natural disasters.Common circumstances in which forbearance might be necessary include: There are many reasons why homeowners would need forbearance, from unemployment to a change in marital status. What Is Mortgage Forbearance?ĭesigned for borrowers who are facing financial hardship, mortgage forbearance is one tool lenders and mortgage servicers can use to help homeowners ease their financial burden in order to avoid defaulting on their loan. When the forbearance period ends, borrowers have several options for repaying what they owe, including tacking the missed payments and principal to the back of the loan and resuming regular payments without any increases or penalties. Mortgage forbearance is a relief program that allows homeowners to pause or reduce their mortgage payments for a few months or longer, depending on your lender, circumstances or both.
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