When does mortgage forbearance end?
In general, while each forbearance program is a bit different, an initial forbearance agreement will typically last three to six months. At that point, if you still need time to recover financially, you have the ability to request an extension on your loan forbearance. Your forbearance can then be extended for up to 12 months.
For its part, COVID-19 forbearance works a bit differently. Under a COVID-19 forbearance plan, there is a chance you may be able to request additional extensions. If you have a federally backed mortgage loan, you can request up to 18 months of forbearance total, provided that you applied for initial forbearance before June 30, 2020. On the other hand, if you have a conventional mortgage, you can request up to 18 months of total forbearance, provided that you've been in forbearance since at least February 28, 2021.
Still, even if you don't qualify for the extra extensions, the White House recently announced that mortgage borrowers are eligible to enroll in a COVID-19 forbearance plan through September 30, 2021.
Mortgage forbearance vs. deferment
As a borrower, you may wonder what is the difference between mortgage forbearance and deferment. Truthfully, these two terms go hand in hand. At its core, the term "deferment" refers to one of the repayment options that may be available to you after you exit your forbearance period.
Deferment allows you to add the missed payments from your forbearance period to the end of your loan. Notably, in order to receive deferment when coming out of your forbearance period, you'll need to get approval from your loan servicer. Not all borrowers will qualify for this option. You may need to look into alternatives such as a repayment plan or loan modification.
Mortgage forbearance pros and cons
Before entering into a forbearance agreement, it's important to get a sense of the pros and cons of using this form of mortgage assistance. To that end, we've laid them out below for your consideration:
- It may help you avoid foreclosure: Typically, missed monthly payments can result in foreclosure, but a forbearance agreement can give you mortgage relief without putting your home at risk.
- It gives you time to deal with short-term financial hardship: If your money needs to go to other expenses during times of financial hardship, forbearance gives you the freedom to take care of those necessities and keep your home by reducing or pausing your monthly mortgage payment.
- Lender involvement creates goodwill: Lenders offer forbearance as a mortgage relief option because they want to help mortgage borrowers. Making a forbearance request is much more likely to result in a positive outcome than if you've had multiple missed payments.
- It will have a negative impact on your credit score: Mortgage forbearance information is sent to the credit reporting agencies, meaning it will ding your credit score. Still, it won't hurt your score as much as missing a series of mortgage payments.
- There's a chance that your payment could increase: Your payment could increase after your forbearance period as part of your repayment plan. You'll need to talk to your lender about what you can afford to pay.
- It's only useful for short-term financial hardships: If you're having trouble paying your mortgage on an ongoing basis, you should look into other options.
Is mortgage forbearance a good idea?
Like any other real estate financing decision, the decision of whether or not to make a forbearance request is a personal one. At its core, mortgage forbearance is a mortgage relief option that is meant to help borrowers stay afloat during short-term financial troubles. If you're experiencing a short-term hardship, such as a job loss or temporary illness, forbearance can provide the mortgage relief you need to get your finances back on track.
If, however, you're having trouble paying your mortgage on an ongoing basis, it may be a better idea to look into more permanent options, such as asking your mortgage lender for a loan modification or even selling your home.