Key takeaways

  • Mortgage forbearance allows a borrower to temporarily stop making payments or make smaller payments amid financial hardship.
  • Mortgage forbearance typically lasts three to six months.
  • The borrower is still responsible for making full mortgage payments after the forbearance period ends.

If you’re concerned about your ability to make your next mortgage payment, you might be able to work with your lender on a forbearance agreement. Doing so can help you avoid late penalties, going into default and foreclosure. To get a standard mortgage forbearance agreement, you’ll have to present documentation proving your financial hardship.

What is a forbearance agreement?

Mortgage forbearance is an agreement arranged between you and your lender to provide you with temporary relief from paying your mortgage, either by lowering or pausing the payments.

Borrowers typically request forbearance from their mortgage lender or servicer when there’s a change in their financial situation that impacts their ability to pay, such as a major illness, job loss or a natural disaster.

Forbearance doesn’t mean that you’re off the hook for the missed or reduced payments — you’ll still owe the amount you missed at a later date, usually when the forbearance period ends. You can negotiate the details of your forbearance with your lender, but typically, the initial forbearance period lasts between three to six months.

What is a standard mortgage forbearance agreement?

In a standard mortgage forbearance agreement, the lender typically agrees not to foreclose on the property when you’ve fallen behind on payments. Instead, you and your lender will negotiate an agreement that allows you to make payments under a revised mortgage plan that’s designed to eventually bring you current on loan payments.

This temporary forbearance agreement may include reduced mortgage payments or suspended payments for a set time. Generally, to qualify for this type of agreement, you must be able to demonstrate and submit proof of financial hardship. At the end of the forbearance period that’s been negotiated, you must resume full mortgage payments.

How does mortgage forbearance work?

The forbearance agreement will depend on the loan type and your lender or servicer’s policies. But once it’s in place, your mortgage payments will be lowered or suspended for the agreed-upon time frame. In most cases, your loan will still accrue interest, but you’ll avoid the foreclosure of your home.

Once the mortgage forbearance period ends, you’ll continue with your normal payment schedule, in addition to making up the missed payments. Your lender will work with you to figure out the best way to catch up on missed payments, whether that’s through a payment plan or by making a lump-sum payment. You can even add the missed payments to your loan balance.

Should I apply for deferment or forbearance?

Both mortgage deferment and mortgage forbearance allow borrowers to cease making monthly payments temporarily. The difference lies in what happens when the temporary period is over.

In a deferment, your lender adds the amount that’s been deferred to the end of your loan term. That means you don’t need to worry about making extra payments in addition to your regular monthly payments like you would in a forbearance.

As for which option to pursue, it depends on your financial situation and whether you can afford to make catch-up payments sooner rather than later. If you expect your finances to improve quickly and you can afford the payments, then forbearance may be the best choice. On the other hand, if you don’t mind extending your loan term to make up payments, and you don’t foresee your situation improving anytime soon, then deferment may be the way to go, if your lender allows this.

What a forbearance agreement looks like

Forbearance agreements differ between mortgage lenders since they’re based on factors such as the investor requirements of your loan and the type of mortgage you have.

Whoever your lender is, your agreement will outline the terms of the forbearance period, such as:

  • The length of the forbearance period
  • How the missed payments will be repaid and any late fees you may be responsible for
  • The amount of payment required during the forbearance period, if any
  • Whether the lender will report the forbearance to the credit agencies
  • Whether interest will continue to accrue on the missed payments

Can forbearance hurt my credit?

You should continue to make your mortgage payments until you receive a written notice that the forbearance agreement is in effect. If not, your lender could report those missed payments to the credit bureaus, which can negatively affect your credit score.

In addition, make sure to check your credit report regularly to ensure your lender doesn’t mistakenly report catch-up payments as late ones. If there is an error, ensure you dispute it as soon as you can.

How to ask for a mortgage forbearance

To request a mortgage forbearance, contact your lender or whoever services your mortgage payments as soon as possible. Typically, you’ll need to provide documentation proving that you’re experiencing financial difficulty.

In any case, you’ll need information such as your most recent mortgage statement, an estimate of your monthly expenses and your current monthly income. It’s best to have documents such as pay stubs, medical bills or a layoff notice handy in case you need to provide proof when you request a forbearance or extend an existing forbearance period.

What happens after forbearance?

Once the forbearance ends, you’ll have to determine a repayment plan for what you owe from that period. Depending on who issued your home loan, you’ll have different forbearance repayment options. In most cases, this includes repayment plans that add to your existing monthly payment, deferment that pushes those payments to the end of your loan period, lump sum repayment that allows you to pay the missed payments all at once, or loan modification that changes the terms of your existing mortgage.

Bottom line

A standard mortgage forbearance agreement is a solution for homeowners who find themselves experiencing financial hardships. You can negotiate the arrangement with your lender to provide temporary financial relief. It is not an option that allows you to escape financial responsibility, but does defer some payments to allow you to stabilize your situation.