With mortgage forbearance, you can pause your monthly mortgage payments temporarily in case of a temporary financial setback — such as a job loss or medical emergency — when you need time to recover financially. After the grace period ends, you’ll have to resume the mortgage payments including interest and other fees.
Forbearance can help you avoid foreclosure due to non-payment or delayed mortgage payment which can help you save the home you worked so hard to buy/build. If you inform your lender or loan servicer beforehand about your financial situation, you’ll have the opportunity to work with them to find the best terms for forbearance which creates goodwill with your lender.
But there are also drawbacks to opting for a forbearance:
- Forbearance does not alter how much you owe the lender — it only delays payments. This means you may even end up paying more than what you originally owed because you need to make up for the missed payments during forbearance. If you’re unable to make the payments on time after the grace period, the lender still holds the right to sell your house to recover its losses.
- You may have to make higher payments after the grace period like a lump sum and higher interest rates depending on the repayment option you chose.
- Since lenders have to also report late or non-payment of mortgages to credit bureaus, your credit score may also take a hit.
Talk to your loan servicer/lender about whether forbearance is the best option for you before you decide. There may be other cheaper options for you that may not require you to defer payments as well.
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