Mortgage forbearance allows homeowners to pause or reduce mortgage payments during a short-term financial setback such as a job loss or major illness. This can help borrowers avoid payment delinquencies or foreclosure.
Lenders do not automatically grant forbearance. You’ll need to prove your financial hardship and make your request to the mortgage holder.
There are also some downsides if you are granted forbearance that you must consider as part of the process. However, one thing working in your favor is that it’s more profitable for a lender to keep the loan in good standing than to sell it in a foreclosure.
What To Do If You’re Facing a Financial Hardship?
Communication with your lender or servicer is the first step to seeing if you can qualify. Be prepared to document your financial hardship with employment separation documentation, medical bills, major encumbrances, and anything supporting your claim.
Lenders may also want to know how long the hardship is anticipated to last, if that information is available.
Qualifications for forbearance vary by lender and circumstances, so your initial discussion should also cover what those requirements are, so you get the best handle on whether you qualify.
One thing worth noting: following a disaster or other qualifying event, some mortgage lenders set a time limit on how long you have to request forbearance.
If you do qualify, your lender will work with you to create a forbearance agreement. This will spell out the length and amount of payments you’ll still need to make, and how you’ll repay the lender after the forbearance period ends.
You’ll also get an explanation of how interest accrues during forbearance and whether your lender will report the forbearance to credit reporting agencies, which could impact your FICO score.
If you’re having financial difficulties after losing your home in a disaster, your property taxes will also continue to be collected. You may need to call your tax assessor to ask for a delay if you need it.
Tax assessors are usually lenient after a disaster and may suspend tax collections or forgive property taxes for people who have lost their homes.
Mortgage Forbearance Options
Initial forbearance plans typically last three to six months. However, you can often request an extension if you need more time to get your finances in order. Some lenders may extend forbearance for up to a year and, in rare cases, even longer, depending on your unique situation.
Forbearance agreements can be set up in a few different ways. Your lender and your situation may influence which types of agreements are available. The most common are:
- Paused payments repaid when forbearance ends: Payments stop for a specific number of months, but you must pay the whole amount back when payments restart.
- Paused payments repaid at the end of the mortgage: Payments stop for a specific number of months, and the accrued amount is repaid by adding more payments at the end of the mortgage or by taking out a new loan.
- Reduced payments repaid during the mortgage term: You reduce payments during forbearance to a level you can afford, then spread repayment out later by increasing your monthly payment.
In all cases, you can still make a partial payment above what’s been agreed upon. Remember that forbearance doesn’t eliminate payments — it only delays them. At some point, you’ll be required to pay that amount back, so anything you can do to minimize the financial impact afterward can help in the long run.
Note: During the COVID-19 pandemic, Fannie Mae, Freddie Mac, FHA, USDA, and VA offered expanded forbearance extensions of up to 18 months total for borrowers who requested an initial forbearance plan by a specific 2020 deadline. Those pandemic-specific provisions have since expired. If you’re considering forbearance today, ask your lender or servicer directly about current maximum forbearance terms for your loan type.
Other Mortgage Options
Forbearance is one of several options to help you overcome financial hurdles.
Forbearance changes loans in the short term, but a loan modification changes terms permanently. A modified loan can reduce monthly payments to make them more manageable, often with a lower interest rate spread out over a longer time frame.
If it appears your financial trouble may last more than a year and you don’t see your finances improving anytime soon, a loan modification may be a better long-term solution than forbearance.
Other strategies worth considering include:
- Reassessing tax deductions to increase your monthly income
- Asking for financial help from family and friends
- Talking to your lender about other mortgage relief options
- Refinancing into a lower rate or more manageable payment, if your situation allows
If you need a lawyer, there may be resources to help. You may qualify for free legal services through legal aid sources such as your local bar association. If you’re a service member, consult your local Legal Assistance Office.
Sometimes, your best or only course of action may be to sell your home to pay off your mortgage debt.
The Pros of Mortgage Forbearance
- Temporarily stops or lowers monthly mortgage payments
- Flexible repayment options
- Can help prevent or pause foreclosure
- You can still refinance or sell your home
- Creates lender goodwill by being upfront about your issues
- Foreclosure costs are higher for lenders than the cost of forbearance
- You get to keep living in your residence during times of crisis
Cons of Mortgage Forbearance
- There’s a good chance your credit will take a hit
- You must still repay the entire amount owed at some point
- Monthly payments might increase when forbearance ends
- Attempts to refinance could also be difficult
- Forbearance may not be an option for rental properties or second homes
- If you sell your home, lenders can recover missed payments from that sale
Where to Find Help With Mortgage Forbearance
HUD sponsors housing counseling agencies nationwide to provide free or low-cost advice on buying, renting, foreclosure avoidance, credit issues, and forbearance. You can search online for a housing counseling agency near you or call HUD’s interactive voice system at (800) 569-4287.
Housing counseling agencies are permitted to charge reasonable and customary fees for counseling and education services, provided certain conditions are met:
- Agencies must provide counseling without charge to persons who demonstrate they cannot afford the fees
- Agencies must inform clients of the fee structure in advance of providing services
- Fees must be commensurate with the level of services provided
If you are facing foreclosure and want the assistance of a housing counselor, search the list of Foreclosure Avoidance Counselors or visit the Making Home Affordable program Q for Borrowers.
If you want to talk to a reverse mortgage counselor, please search here.
Final Thoughts
Forbearance can help if you’re struggling to pay your mortgage. Your lender or servicer will arrange for you to pause or make smaller mortgage payments temporarily, but you’ll still owe the full amount and need to pay it back at some point.
Forbearance is best suited for temporary financial hardships, such as if your home is damaged in a fire or natural disaster, you have medical issues, or you’ve lost your source of income. Buying time until you can sort through your issues means you can stay in your home without disruption and avoid foreclosure for the time being.
However, if your situation is likely to last longer than a year, it may be best to look at a loan modification, refinance, or selling your home to satisfy your debts.
The key is communicating with your lender as early as possible to develop the best agreement that protects both parties’ interests. And if a lower monthly payment is what would actually solve your problem, it’s worth finding out if refinancing could get you there. Start a refinance application with Refi.com to see what rate and payment you could qualify for — before assuming forbearance is your only path forward.
