If you are a homeowner facing financial challenges that may impact your ability to meet mortgage obligations, it can be helpful to understand the process of mortgage forbearance.
This information is assembled to help you understand what mortgage forbearance is and what steps you might be able to take, based on your specific financial picture.
What is Mortgage Forbearance?
Mortgage forbearance is a temporary relief program that allows homeowners to pause or reduce their mortgage payments for a specific period.
Forbearance is not loan forgiveness; rather, it’s a way to help people facing short-term financial difficulties to regain their financial footing.
How Does Forbearance Work?
When approved for forbearance, your mortgage lender agrees to temporarily suspend or reduce your monthly payments.
The missed payments are not forgiven but are typically added to the end of the loan term or repaid over an extended period.
This allows you to weather a financial storm without immediate repercussions on your credit score or risk of foreclosure.
Key Points to Consider
- Communication is Key: Open and honest communication with your mortgage servicer is crucial. Reach out to them as soon as you anticipate (or experience) any financial difficulties. They can guide you through the forbearance process and help you understand your options.
- Temporary Relief, Not a Permanent Solution: Forbearance provides short-term relief, and it’s important to plan for the future. Discuss with your lender how you will repay the missed payments once the forbearance period ends. Options may include a lump sum payment, a repayment plan, or loan modification.
- Impact on Credit Score: While entering forbearance itself does not directly impact your credit score, it’s essential to understand how it may be reported on your credit history. Work with your lender to ensure accurate reporting and discuss ways to minimize the impact on your credit.
- Stay Informed About Changes: Policies and guidelines regarding forbearance programs may change, especially in response to economic conditions. Stay informed about any updates from your lender or relevant government agencies to make informed decisions. The CFPB website offers educational resources.
- Explore Alternative Options: Forbearance may not be the only option available to you. Explore other assistance programs, loan modification possibilities, or refinancing options that may better suit your long-term financial goals.
Remember, you’re not alone, and many are facing similar challenges. Mortgage forbearance is a tool designed to provide an option when you need it most.
Your Next Steps
Facing financial challenges? Take this opportunity to be proactive, learn more about your finances, put a plan in place, and access resources for the future. A great start is to connect to financial guidance available through 995Hope.
Forbearance does provide temporary relief, but it doesn’t erase the money you owe on your mortgage. Once the forbearance ends, you must repay the missed payments, but not necessarily all at one time.
That’s why our housing counselors encourage people to create a financial plan to get on a firm foundation going forward.
- Start with short term goals you can achieve within one year, such as paying down a debt or paying off a medium-sized bill. Then, add long-term goals like saving for retirement or building your child’s college fund, to keep track of your full financial picture.
- Create a budget to reach those goals by gathering all your bills and pay stubs. Then, write down your monthly income and expenses, and break down your expenses into “needs” like housing and food, and “wants” like streaming services and eating out. Next, subtract your expenses from how much you make. If you don’t have enough left for savings goals, try to cut back on some expenses or find ways to increase your income.
- Our counselors can also help you review your options.
- For instance, your mortgage servicer may offer a loan modification. This permanently changes the terms of your original loan. This could make the payments and terms of your mortgage more manageable.
- Another option could be to refinance. Once you have resolved your outstanding forbearance amount, you may qualify to refinance your loan.
The key to these options is to be proactive and communicate with your mortgage servicer to find the best fit for your situation.
It Starts with 995Hope
As you navigate the complexities of forbearance, stay connected with your lender, seek financial advice if needed, and maintain a proactive approach to managing your finances. By doing so, you can emerge from challenging times with greater resilience and a clearer path toward financial stability.
995Hope offers resources to help improve your financial health and keep you on a productive path, regardless of the challenges you might face.
Working one-on-one with certified housing counselors, you can receive free, confidential and comprehensive guidance through our national Homeowner’s HOPE™ hotline – 1-888-995-HOPE™ (4673).
