What is Mortgage Forbearance?
This article will discuss what mortgage forbearance is and when it should be considered.
Mortgage Forbearance allows a homeowner to pause their normal monthly mortgage payment or possibly lower it for unforeseen circumstances which present themselves to them. Events such as a job loss, medical issues or other major financial crisis could qualify. This pause on payments will allow the homeowner not to have the house foreclosed on.
Considering the unprecedented times, we all have experienced due to COVID, many homeowners needed relief due to reduced or eliminated income. It is important you work very closely with your mortgage servicer to ensure they are aware of your situation and approved for the forbearance before you stop or reduce your payment. Otherwise, you jeopardize your credit score and worthiness.
What are your options as you approach the end of your forbearance period. You can pay back in a lump sum all the missed payments which would bring the mortgage current. You can work with the servicer to come up with a payment plan usually adding some amount to the normal payment to catch up or lastly, speak to your mortgage servicer to request an extension.
The final two options are more dire in nature. You could as the servicer to modify your original mortgage terms to permanently adjust your payment for the remainder of the loan or secondly, sell the home and payoff your mortgage amount and any amount in forbearance. This is considered a short sale and you need to work closely with your mortgage servicer to make sure it is done properly.
Mortgage forbearance is typically only offered on homes which are a primary residence. Always consult with a trusted mortgage advisor or servicer to ensure you are receiving accurate information and proper next steps.