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- Deferment and forbearance are sometimes used interchangeably, but they're not the same.
- If your mortgage is in forbearance and you've temporarily stopped making payments, deferment is one option for making up the missed payments.
- Deferment lets you delay repaying the overdue payments until the end of your loan term, so you can get back on your feet as you exit forbearance.
For homeowners facing tough times, it’s possible to postpone monthly payments and still keep your house through a process known as deferment. Deferring your mortgage payments is not the same as entering into a forbearance plan, though the two options are used interchangeably.
What is mortgage deferment?
Mortgage deferment is one option to handle repaying the payments you skip while your mortgage is in forbearance. It refers to an agreement between the lender and the borrower to add the overdue payments to the end of the loan term. This amount becomes payable — often in a lump sum — once the loan term ends, when you sell your home or if you choose to refinance to another mortgage. You should also know that the amount owed will not accrue interest.
Mortgage forbearance vs. deferment
It’s easy to confuse forbearance and deferment, but there’s a key difference between them. Simply put, if your mortgage goes into forbearance, you’ll need to have a plan to make up the payments that you missed during that period — and deferment is one of the options that might be available to you.
Forbearance is one of the most common means of relief for homeowners facing a short-term obstacle to paying their mortgage. When you put your mortgage into forbearance, you temporarily stop making monthly payments (or make lower payments) while you sort out whatever hardship has prevented you from paying. Mortgage payments are typically suspended for three to six months, but the time could be longer or shorter depending on your financial situation.
When the forbearance period ends, there are a few ways borrowers can repay the missed amount, one of which includes deferment. But before you can defer mortgage payments, your servicer will determine if you’re eligible based on how many payments you’ve missed and your potential to resume making payments.
How to qualify for mortgage deferment
So, how can you defer a mortgage payment (or payments) after forbearance ends? If you’re interested in this repayment option, consult with your servicer early on. Depending on your situation, you might not automatically qualify for this type of repayment structure, or your servicer might limit how many payments you can defer.
How to decide if deferment is right for you
A mortgage deferment after forbearance is generally a good course of action when you know your financial hardship is only temporary and you want to keep your home.
But you should be honest with yourself: Will you realistically be able to make up those deferred mortgage payments in a lump sum when the due date comes? If it’s unlikely, or if your financial woes are more long term, consider alternatives to deferment. These can vary by your loan type but may include asking for a loan repayment plan or a loan modification, the latter of which permanently reduces your monthly payment.
“If you’re in a difficult financial situation and you’ve exhausted pandemic forbearance, a deferment might be the best option,” says Bankrate analyst Jeff Ostrowski. “Homeowners struggling to pay the mortgage also want to consider selling. Home values in many areas are at or near record highs, and selling your home can give you a fresh start.”
Mortgage relief FAQ
In most cases, forbearance won’t count as a strike on your credit report; your lender or servicer will simply report the loan as current. Your repayment plan (deferment or otherwise) shouldn’t impact your credit, either, provided you repay on time.
Before agreeing to forbearance or any other form of relief, confirm with your servicer how the arrangement might affect your credit, and make sure you understand what you’re responsible for paying and when.
Will mortgage companies defer payments for all borrowers? No. So, if you don’t qualify for this type of repayment after forbearance, you can look into alternative repayment options, depending on what type of loan you have.
For VA and USDA loans, you may be able to start a repayment plan or loan modification, which gives you a longer loan term. With FHA loans, loan modification is another repayment option.
For conventional loans, your options may include reinstatement (where you repay all of your missed payments when your forbearance ends) and a repayment plan (where you can pay it back in installments). You might also be able to refinance your loan or apply for the Flex Modification program (FMP) to extend your loan term or lower your interest rate.