Mortgage Forbearance: What you Should Know
Millions of people across the country are facing financial hardships during the coronavirus crisis. If you are one of those impacted, you may be concerned about how to make your mortgage payments. Mortgage forbearance may be an option – but here is what you should know:
What is mortgage forbearance?
Forbearance does not equal Forgiveness! Forbearance is when your mortgage servicer (they send your monthly statement and manages your loan) allows you to pause or stop your payments for a limited period of time. This is a temporary solution during financial hardship – you will still owe the amount missed.
How does it work?
You will need to contact your lender to request forbearance. Qualifications will vary and the type of loan you have can also determine what options you have. This includes amount, length of the forbearance period and how you’ll repay after the forbearance period ends. Interest will still accrue during forbearance. Once the period ends, you will be required to pay your lender back according to the previously arranged terms. This could be a lump sum payment (balloon payment), adding an additional amount to your existing payment or add to end of the mortgage, lengthening its term.
Will mortgage forbearance affect my credit?
Mortgage lenders have the right to report forbearances to the credit bureaus. You will need to check with your lender to see what their policies are. If your lender does report, a mortgage forbearance is far less damaging to your credit score than a missed payment and can help avoid foreclosure.
Is mortgage forbearance a good idea?
Bottom line is, if you can still afford to make your payment, do it. Regardless of the plan you work out with your lender, you will still be required to pay it back with interest. If the future is uncertain and you do not know how long you will be in your financial situation, this may not be the right solution.
**Even if you enter into a mortgage forbearance with your lender, speak with a real estate agent. Selling your home before foreclosure and bad credit could be an option. A good agent will provide a great market plan including professional staging, photographer and marketing strategy to sell your home quickly.
