Facebook Email icon An envelope. It indicates the ability to send an email.
Email Twitter icon A stylized bird with an open mouth, tweeting.
Twitter LinkedIn icon
LinkedIn Link icon An image of a chain link. It symobilizes a website link url.
Copy Link lighning bolt icon An icon in the shape of a lightning bolt.
Save Article Icon A bookmarkAffiliate links for the products on this page are from partners that compensate us (see our advertiser disclosure with our list of partners for more details). However, our opinions are our own. See how we rate mortgages to write unbiased product reviews.
If you're concerned about making your next mortgage payment, a forbearance agreement may be an option.
With your mortgage lender or servicer's approval, mortgage forbearance lets you pause or temporarily lower your monthly payments. Interest might accrue, and you'll eventually repay the skipped payments. But in the meantime, you maintain homeownership, avoid foreclosure, and enjoy some much-needed time to get your finances back on track.
Here's what you need to know if you're considering mortgage forbearance.
When you're facing financial hardship, your mortgage lender will typically give you a few options. Mortgage forbearance is often one of them.
Mortgage forbearance is a temporary solution for homeowners having trouble making their monthly payments. It allows you to take a break (or pay a reduced amount) for a specified time — usually three to six months.
"A mortgage forbearance may make sense if you are going through a rough time and have a plan for getting out," says Jay Zigmont, a CFP® professional and founder of Childfree Wealth. "If you are handling a medical emergency, are out of work, and plan on returning to work in three months, then a mortgage forbearance may get you some breathing room."
Of course, it's not free money. "While mortgage forbearance can provide temporary relief, it is important to remember that the missed payments will still need to be made at some point," says Shaun Martin, owner and CEO of Watson Buys, a Denver-based real estate investment company.
That means forbearance may not be a good option for everyone. "If you can't afford your mortgage, getting a forbearance only kicks the can down the street and does not fix anything," Zigmont says.
Forbearance is a temporary fix most often used when a borrower has a short-term financial setback and expects to bounce back once the hardship has passed. Common situations include:
It can also help you avoid more severe alternatives like mortgage delinquency or foreclosure. Keep in mind, though: You are still responsible for repaying the skipped payments once the forbearance period ends.
Before pursuing a mortgage forbearance, it's important to understand what goes into these agreements and how they may impact your finances moving forward. Here's how to apply for a mortgage forbearance and what to expect when you do:
The application process and qualification requirements for forbearance vary depending on factors like your loan servicer, your mortgage type, and investor requirements on your loan. The first step is letting your servicer know what's going on.
"When requesting forbearance, be sure to communicate with your lender and explain your financial situation," says Jon Sanborn, cofounder of SD House Guys, a home-buying company in San Diego, California.
He adds that you should be honest about why you're having trouble making your mortgage payments and be able to provide proof of your financial hardship. It also helps if you have a plan for catching up on missed payments once the forbearance period ends.
Once you contact your mortgage servicer and explain the situation, you can officially request forbearance.
Again, the exact eligibility requirements will vary by lender, but you will need to prove your financial hardship in some way. Usually this requires financial documentation — paperwork that details your income, expenses, debts, and employment situation.
If your servicer approves the forbearance, you'll receive a formal document outlining the terms of the agreement. You can appeal the decision with your servicer if they deny your request. In that case, a different loan officer will review your application and provide an updated decision.
Before you sign and return the forbearance agreement, make sure you understand the terms and what happens after the forbearance period ends. Usually, you'll receive a temporary reprieve from payments for three to six months, and then repayment of your loan will resume. You should also check for any fees.
Under some agreements, you may be required to make partial payments, and you'll usually need to stay current on your property taxes, homeowners insurance, and homeowners association (HOA) dues, too.
There are various repayment options out there, but typically, lenders will allow you to either make a lump-sum payment at the end of your forbearance period, spread the missed payments across your remaining payments, or tack on additional monthly payments to the end of your loan.
In some cases, they may also offer you a loan modification, allowing you to permanently change the terms and payment associated with your mortgage.
Forbearance itself shouldn't result in a major negative impact on your credit score — as long as you comply with the agreement. Your credit score will take a hit if you skip any payments (either before or after your forbearance agreement is in place) or if you enter foreclosure.
Forbearance can provide much-needed relief if you fall on hard financial times, but it's not perfect. Consider these pros and cons before pursuing mortgage forbearance.
Mortgage forbearance isn't the only option if you're having financial trouble. You can also explore:
Mortgage forbearance temporarily supersedes your loan agreement. Loan modification permanently changes the terms of your loan, making payments more manageable for the long haul.
Loan modification is often reserved for homeowners who want smaller payments on a long-term basis but can't refinance due to their financial situations.
Lenders may also offer repayment plans, which allow you to spread the balance of missed payments out over time. These can make getting current on your loan a little bit more manageable.
Some lenders may offer loan forgiveness or agree to reduce your principal balance if you're facing an extreme financial hardship. They also may offer a deed in lieu of foreclosure, which lets you forfeit the house to your lender. In exchange, they agree to not pursue foreclosure, which could damage your credit severely.
Selling your property is a last resort option you might consider if you can't make payments and don't expect things to improve in the near term. With this strategy, you'd sell your home and use the sale proceeds to pay off your loan balance. (If you currently owe more on the home than it's worth, though, this isn't an option).
How long can I be in forbearance? Chevron icon It indicates an expandable section or menu, or sometimes previous / next navigation options.
Typically, mortgage forbearance periods last for three to six months, though it depends on your lender. You may also be able to apply for a mortgage forbearance extension in some cases.
Will my lender charge fees for forbearance? Chevron icon It indicates an expandable section or menu, or sometimes previous / next navigation options.
Some lenders may charge fees for setting up forbearance. Make sure you understand the terms and costs of your forbearance agreement before signing anything.
Will a forbearance impact my credit score? Chevron icon It indicates an expandable section or menu, or sometimes previous / next navigation options.
There is a link between mortgage forbearance and credit score reductions, but the impact will likely be much less severe than it would with a late payment or a foreclosure on your record.
Jean FolgerJean Folger has 15+ years of experience as a financial writer covering real estate, investing, active trading, retirement planning, and retiring abroad. She is co-founder of PowerZone Trading, a company that has provided programming, consulting, and strategy development services to active traders and investors since 2004. Previously, Jean was a real estate broker, an English teacher, and a trip leader for an adventure travel company.
Read more Read lessWestern Alliance Bank High-Yield Savings Premier Earn 5.31% APY on your entire account balance – more than 10 times the national average
5.31% annual percentage yield (APY) is accurate as of 7/11/2024 and subject to change at the Bank’s discretion. Minimum deposit required to open an account is $500 and a minimum balance of $0.01 is required to earn the advertised APY. Accurate as of the time of publication. The national average rate referenced is from the FDIC’s published National Rates and Rate Caps for Savings deposit products, accurate as of 8/19/2024. See the FDIC website for more information. https://www.fdic.gov/resources/bankers/national-rates/index.html
Editorial Note: Any opinions, analyses, reviews, or recommendations expressed in this article are the author’s alone, and have not been reviewed, approved, or otherwise endorsed by any card issuer. Read our editorial standards.
Please note: While the offers mentioned above are accurate at the time of publication, they're subject to change at any time and may have changed, or may no longer be available.
Sign up to get the inside scoop on today’s biggest stories in markets, tech, and business — delivered daily. Read preview
