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Mortgage forbearance can help when you don’t have enough money to make your mortgage payment. With your servicer’s permission, it allows you to make smaller payments or put payments on hold for a short period of time. Interest may still accrue, and you’ll have to catch up on your missed payments at some point.

Here’s what you need to know about mortgage forbearance:

What is a mortgage forbearance?

Mortgage forbearance lets you delay mortgage payments when you’re having financial problems and refinancing isn’t an option.

Some reasons that may cause you to seek forbearance include:

  • You lost your job
  • You got divorced
  • You were hit by a natural disaster
  • You haven’t been able to work for health reasons
  • Your hours were reduced
  • Your property taxes went up

If you tell your mortgage servicer about your circumstances, they may grant you forbearance, allowing you to avoid becoming delinquent or incurring late fees. Perhaps most important, forbearance can help you avoid foreclosure.

Good to know: Mortgage forbearance can hurt your credit score, because your mortgage servicer may report the delinquency status of your mortgage and your entrance into a forbearance plan to the credit bureaus. However, it will hurt your credit less than a foreclosure.

If your home loan is owned by Fannie Mae or Freddie Mac, or if you have an FHA, VA, or USDA mortgage, you may be eligible for mortgage forbearance if you experience a financial hardship. You may still be eligible for forbearance if you don’t have one of these mortgage types, but your mortgage servicer will have more discretion to make that decision.

Forbearance is not limited to first mortgages. It may also be available on your second mortgage (e.g., home equity loans and lines of credit).

How does mortgage forbearance work?

Mortgage forbearance means that your loan servicer — the company you send your mortgage payments to — officially gives you written permission to stop making payments or to make reduced payments for a specified period of time, typically three to six months.

Tip: If your loan servicer denies your application for mortgage forbearance, you have the right to appeal within 14 days of receiving your denial notice. After that, the decision is final. You can apply again if your financial circumstances get worse. In total, you may be able to receive up to 12 months of forbearance.

You may need proof of your financial hardship, such as recent bank statements and pay stubs, and your servicer will want to know whether your hardship is short-term (six months or less) or long-term (more than six months).

While forbearance does give you temporary relief, it also comes with certain requirements and consequences:

  • You may accumulate extra interest on your home loan.
  • You must make up any missed payments and extra interest.
  • You must remain current on homeowners insurance, homeowners association fees, and property taxes.

If you want to sell your home while under forbearance, you can. The sale proceeds will go to paying off your mortgage, including the payments you skipped and any extra interest you accrued. However, you can’t do a home loan refinance during forbearance.

Find Out: Just How Often You Can Refinance Your Home

How to get mortgage forbearance

Here are the steps you can take to receive mortgage forbearance:

  1. Contact your mortgage servicer to request forbearance.
  2. Give a concise, factual explanation of your financial hardship.
  3. Tell your servicer whether you are able to make a partial monthly payment and, if so, how much.
  4. Tell your servicer how many months of forbearance you are requesting.
  5. Gather and submit any documents your servicer requires.
  6. Wait to receive a formal document approving your forbearance and outlining the terms.
  7. Sign and return the agreement, if required.
  8. Proceed with the terms of the agreement.
  9. If declined, consider appealing with additional information to strengthen your case.

If your servicer gives you forbearance, you must comply with the terms you agreed to, such as making reduced payments on time. If your circumstances worsen, contact your servicer to ask about changing the agreement so you can avoid foreclosure. You can send extra payments or end forbearance early should your circumstances improve.

What happens when mortgage forbearance ends?

When mortgage forbearance ends, you will resume making your regular monthly mortgage payments if you can afford to do so.

Per the terms of your agreement, you will also need to make up your missed payments and extra interest. Your servicer might allow you to pay back what you missed over several months. Adding the missed payments to the end of your loan term is another possibility.

If Fannie Mae or Freddie Mac owns your loan, or if you have an FHA, VA, or USDA loan, you will not have to repay everything at once as soon as your forbearance ends. For privately held loans, repayment in full may be required.

Tip: If you can’t pay what you owe when forbearance ends, you may be eligible for a loan modification. This can allow you to extend your mortgage term and lower your monthly payments.

You can sell your home once forbearance ends

You have the option to sell your home after forbearance ends, however, before you can get a new mortgage to purchase a home, you will need to wait three months. You’ll also need to make three consecutive mortgage payments under your repayment plan or loan modification.

Your original loan will not change when forbearance ends, except that you will be required to make up for the missed payments and any additional interest. However, if you and your servicer agree on a loan modification after forbearance ends, then your loan terms will change.

Learn More: When to Refinance a Mortgage

Refinance as an alternative to mortgage forbearance

If your financial setback is mild and you’re still receiving income, you might be able to avoid forbearance and refinance instead.

Borrowers with USDA or FHA loans may be eligible for a streamline refinance that results in a lower interest rate and/or extended payment period but does not require income verification.

Extending to a 30-year mortgage could make your monthly payments more manageable as well, if you’re anticipating a long-term financial hardship and you want to stay in your home. Though, this will cost you more interest over time. It’s important to consider lender fees and closing costs as well when refinancing.

Credible makes it easy to compare mortgage refinance rates. Get prequalified rates from our partner lenders in just three minutes using the form below.

Find out if refinancing is right for you

  • Actual rates from multiple lenders – In 3 minutes, get actual prequalified rates without impacting your credit score.
  • Smart technology – We streamline the questions you need to answer and automate the document upload process.
  • End-to-end experience – Complete the entire origination process from rate comparison up to closing, all on Credible.

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Checking rates will not affect your credit

Mortgage forbearance and the CARES Act

You’re eligible for mortgage forbearance in 2020 under the CARES Act if:

  • Your home loan is owned by Fannie Mae or Freddie Mac
  • You have an FHA, VA, or USDA mortgage

You also must have experienced a financial hardship directly or indirectly related to the pandemic. However, you aren’t required to provide documentation of your hardship.

You have a right to an initial forbearance of 180 days and an extension of another 180 days, for a total forbearance of 360 days. If your financial hardship is totally unrelated to the pandemic, your lender will evaluate your circumstances using its normal loss mitigation procedures.

Mortgage servicers are supposed to report CARES Act-related forbearance to the credit bureaus in a way that will not affect your credit score. They are not allowed to charge extra interest, either.

Check refinance rates:

About the author

Amy Fontinelle

Amy Fontinelle

Amy Fontinelle is a mortgage and credit card authority and a contributor to Credible. Her work has appeared in Forbes Advisor, The Motley Fool, Investopedia, International Business Times, MassMutual, and more.

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