Forbearance is an arrangement in which the lender lets you pause payments because of financial hardship. While the number of forbearances soared during the height of COVID-19 restrictions, most homeowners have resumed payments as normal. According to the Mortgage Bankers Association’s Monthly Loan Monitoring Survey, 0.7 percent of homes were in forbearance as of Dec. 31, 2022. This represents about 350,000 homeowners.

Coronavirus relief has expired, but some lenders offer forbearance plans for other circumstances. The support available to you will depend on the type of loan you have and your lender’s policy on payment pause.

Forbearance relief is immediate and often gives homeowners room to breathe after they lose a job or face unexpected financial trouble, but many people worry about repaying what they owe once the forbearance period ends. It’s important to keep in mind that borrowers are responsible for repaying the full forbearance amount as well as interest on the payments that were put on hold. However, there are no penalties and forbearance will not affect your credit score.

If forbearance is the best route for your situation, the good news is that there are several repayment options — but the details depend on who owns your loan.

We’ll go through the basics about repaying what you owe after the mortgage forbearance period ends:

  • Identifying who owns your loan and what that means
  • Repayment options after forbearance
  • Repayment options by loan type

Identify who owns your loan (and what that means)

The first step in knowing what your mortgage forbearance repayment choices are is to know who owns your loan.

There can be a distinction between the company that services your loan and the entity that owns it. A mortgage servicer is in charge of the administrative aspects of your loan, such as receiving your monthly payment, handling escrow accounts, getting copies of your statement and other similar tasks. You might have a loan serviced by Wells Fargo but owned by Fannie Mae. One easy way to find out who owns your loan, as well as what options are available to you, is to ask your service provider.

The loan owner is in charge of forbearance options, which is why it’s so important to know who that is.

You can find out if Fannie Mae or Freddie Mac own your mortgage here:

Repayment options for government-backed loans

For borrowers with loans owned by Fannie Mae or Freddie Mac, or insured by HUD, the VA or the USDA, there are several ways you can handle paying back what you owe.

If you take the full forbearance allowed, you can defer mortgage payments up to a year, which means you’ll have to repay one year’s worth of mortgage and interest. Here are the different types of repayment plans available:

Lump-sum payment

A lump-sum payment means that you would pay back the entire amount you owe in one lump sum. This is an option, but certainly not mandatory. And it may be impossible for folks who have come off of a spell of unemployment to come up with the cash, which could be tens of thousands of dollars.

Short-term repayment plan

A short-term repayment allows you to repay your forbearance amount over the course of six months. For example, if you postpone mortgage payments for five months and your monthly mortgage payment (including interest) is $1,000, then you owe $5,000. That amount would be divide by six, which is $833.33. So, when you resume making monthly mortgage payments of $1,000, you would also pay $833.33 for six months until your mortgage is current again.

Extended loan modification

This repayment plan extends your mortgage term by taking the amount you owe and tacking it on to the back of your loan. For instance, if before your forbearance you had 15 years left on your loan and you postponed payments for five months, your new term would be 15 years and five months. This option changes no part of your loan except for the term.

Flex modification

A flex modification is designed for borrowers who can’t afford the mortgage at their current interest rate and/or term. If this is the case, your lender will work with you to modify your loan so that it’s affordable for you. The possibilities for this are many, and so are the implications, so tread carefully here and consider seeking professional advice.

Cap and extend

For borrowers who can’t afford insurance or taxes (which are often paid through escrow accounts funded by borrowers), the lender will make these payments on your behalf during the forbearance. After the forbearance period is over, the amount the lender paid would be applied to your principal balance and the term would be extended. In this instance, if a lender paid $5,000 in escrow payments and your balance is $100,000 over 30 years, your new balance would be $105,000 with a new term of 30 years and six months.

Repayment options by loan type

Fannie Mae and Freddie Mac loans

If you have a Fannie Mae or Freddie Mac loan, you have four options post-forbearance. The first is reinstatement, where you pay back the missed payments right away at the conclusion of your payment pause period.

Second, you can choose to establish a repayment plan with Fannie Mae or Freddie Mac and pay a portion of your missed payments off each month.

You can also ask for a payment deferral. Under this scheme, your missed payments are deferred until the maternity date on your loan, when they become due as a non-interest bearing balance.

Finally, you can ask for a loan modification. This permanently changes your monthly payment to a lower amount, but often includes prolonging the length of the loan.

FHA loans

FHA loans are backed by the U.S. Department of Housing and Urban Development (HUD). These loans don’t require a lump sum payment at the end of a forbearance period. Instead, borrowers can choose from the options afforded by the FHA Home Affordable Modification Program (HAMP). If you had a forbearance on an FHA loan, your options include:

  • Standalone loan modification. This option rearranges your loan by adding missed payments to the principal loan balance. Your loan will be extended to 360 months (30) years. A standalone loan modification will often lower your monthly payments for the future of the loan in addition to resolving your arrears.
  • Standalone partial claim. If you don’t want to change your principal balance, you can apply for this type of resolution. A partial claim puts your unpaid payments into a no-interest lien against your home. You resolve this payment when you either refinance or sell the home.
  • Combination loan combination and partial claim. With this option, the outstanding payments are placed in a no-interest lien against your home, including a portion that needs to be resolved. The remainder is added to your principal balance and extends your loan to 360 months.

USDA loans

U.S. Department of Agriculture (USDA) loans are geared toward people who are buying or building a property in eligible rural areas. Many buyers qualify for no-down payment loans, and the forbearance repayment terms are also generous.

For homeowners who can afford to resume their payments after a forbearance period, the lender must offer either an affordable repayment plan or a mortgage term extension that is at least as long as the length of the forbearance. The latter option allows you to defer missed payments until the end of the loan.

VA loans

If you have a VA loan, servicers and lenders are not allowed to ask for a lump sum payment at the end of your forbearance. The VA says it has a suite of loss mitigation options to keep you in your home. Borrowers can take advantage of both loan modification and payment plans to get back on track. In addition to contacting your lender, you may also seek assistance from the VA Regional Loan Center by calling (877) 827-3702.

Non-federally backed loans

FHA, VA, and USDA loans are backed by the federal government. Conventional loans are not. Your exit terms for a non-backed loan are dependent on your lender; many of these loans are funded by Fannie Mae or Freddie Mac and adhere to the options listed above.

Frequently asked questions about repayment options after forbearance

When does forbearance end?

Your lender will outline the forbearance terms at the start of a forbearance period. During COVID, people with a federally-backed loan were allowed to seek one 180-day forbearance period and two 180-day extensions, for a total forbearance of up to 18 months. This forbearance can’t extend six months beyond the end of the national emergency, which concluded on Sept. 30, 2022.

How soon can you refinance after forbearance?

You can refinance shortly after exiting a forbearance. You must be officially released from the forbearance and make a minimum of three consecutive payments on the loan.