Forbearance vs Deferment Mortgage

It’s easy to panic when you can’t make your mortgage payments but using forbearance or deferment can keep your creditors informed and help get you out of immediate trouble.

A mortgage forbearance, also known as a mortgage forbearance extension, is putting your mortgage payments on hold for a temporary window. The amount of time a mortgage is put on hold is determined by the mortgage lender, the borrower, and other factors but it’s often six months to a year. Interest continues to accrue while on forbearance and all missed payments are due at the end of the forbearance period.

Mortgage deferment is putting off (deferring) or reducing your mortgage payments for a certain period, usually until the end of your loan period. Most homeowners cannot make all payments due from forbearance, so they use deferment to make those owed payments easier. Most lenders do not add interest to loans in deferment.

Mortgage forbearance is designed for someone facing temporary setbacks. For example, a two-month illness that sets you behind on your payments, but you’ll be back on your feet soon.

At the end of your forbearance period the money you paused on will still be owed. Most homeowners can’t make a lump sum payment at the end of forbearance, so they choose to defer the payments.

Remember you don’t have to choose one of the other. Often forbearance results in a deferment plan. Your lender or a qualified real estate agent can help you determine if each or both are best for your situation.

Though the eviction moratorium is still in place in Colorado, you need to act quickly if you’ve experienced any COVID-related hardships in 2020, 2021, or 20222. The moratorium will soon close and anyone who has skipped mortgage payments without any contact with their mortgage lender could be in big trouble.

It’s easy to think of mortgage lenders as faceless bureaucrats but the truth is COVID has affected everyone, including lenders, and they don’t want to kick you out of your home if they don’t have to. To put it in perspective, there are more than 3.5 million mortgages on forbearance since the start of the pandemic.

Under the CARES Act, anyone who was financially impacted by the COVID pandemic can ask for mortgage forbearance up to a year though many lenders are already giving better deals to their borrowers.

Ultimately, every lender is handling COVID related hardships different so it’s best to call them to explain the situation. You can discuss if forbearance is right for you and terms both you and your lender can agree on without your credit being dragged through the mud. You might need to prove your financial hardship to your lender.

Deferment terms depend on the individual lender, but most allow up to a year of deferment. You’ll need to call your individual lender for your terms.

Though it depends on the lender there are generally a few different ways to pay back your mortgage forbearance especially after the leniency granted by the CARES Act.

Deferment or forbearance are not the right choices for everyone. If you’re having only minor trouble making payments or facing a very temporary crisis you have other options:

Forbearance and deferment are complicated processes, but you might need them in case of hardship. If you need more help with your loan or need to explore your options, call The Storck Team. The Storck Team knows many families have been hit hard by the coronavirus pandemic and might need help finding the best solution. If you need assistance with your mortgage or what to say to your lender, call The Storck Team today – we’re here to help.