A forbearance plan can be a very good, necessary, or even essential idea for managing temporary financial crises like job loss, medical emergencies, or natural disasters. It allows borrowers to temporarily pause or reduce payments, helping to avoid foreclosure or delinquency. However, it is not debt forgiveness, as all skipped payments must be repaid.
The major con is that you still accrue interest while in forbearance. This means that your total amount owed will increase. Depending on your loan provider, you may even have to pay an up-front fee to apply for forbearance. This, coupled with continuing to accrue interest, means that you'll owe more overall.
Forbearance is a process that can help if you're struggling to pay your mortgage. Your servicer or lender arranges for you to temporarily pause mortgage payments or make smaller payments. You still owe the full amount, and you pay back the difference later. Forbearance can help you deal with a financial hardship.
And there are important downsides to forbearance to consider, including more money due later and, in some cases, potential impacts to your credit. That said, if you're facing temporary hard times and if your lender offers the courtesy, mortgage forbearance could relieve some pressure and help you to avoid foreclosure.
A forbearance is a temporary postponement or reduction of mortgage payments. It is not payment forgiveness. Under the CARES Act, borrowers are entitled to an initial forbearance period of up to 180 days, upon a borrower's request.
With forbearance, you won't have to make a payment, or you can temporarily make a smaller payment. However, you probably won't be making any progress toward forgiveness or paying back your loan. As an alternative, consider income-driven repayment. You have a limited amount of forbearance available.
Talk to your lender to discuss your options. You may be able change the terms of your loan, or temporarily pause or reduce your repayments. This is called a hardship variation.
Forbearance and hardship programs offer several benefits to both the consumer and the creditor. Borrowers get immediate relief from their debt obligations. With payments lowered or paused, they can focus their attention on their most immediate financial difficulties, like housing or medical emergencies.
To qualify for mortgage forgiveness, you generally need to prove significant financial hardship (like job loss or reduced income), have your mortgage on a primary residence, and apply through your lender for options like loan modification, short sale, deed-in-lieu, or specific government programs (e.g., HAF), providing extensive financial documents to show your situation, though lenders rarely forgive debt outright, preferring other relief.
To lower your mortgage payment, you can refinance to a lower interest rate or longer term, recast your loan after a large principal payment, eliminate private mortgage insurance (PMI), lower property taxes or homeowners insurance, or explore a loan modification if you're struggling financially. Refinancing often involves closing costs, while recasting requires a substantial lump sum, so weigh costs and savings carefully, possibly using an online calculator.
If you're able to pay back three consecutive payments and exit forbearance, you should be able to refinance as normal. Any remaining payments you have to make will be added on to the back end of your loan once you refinance.
Deferrals are good to use if you have a temporary hardship, such as getting laid off for a couple of months, but you know you'll be able to resume making your mortgage payments after the hardship is over.
Depending on your situation, options after the forbearance period may include:
To qualify for forbearance, you typically need to show financial hardship (like job loss, reduced income, medical bills) by contacting your loan servicer, who decides based on your specific loan type (federal/private) and situation, with federal student loans having specific mandatory categories (e.g., military duty, teaching) and easier general approval, while mortgages (especially federally backed) also require proof of hardship but have set terms.
Once forbearance ends, the borrower will still owe the full amount of the loan and must pay back the difference, which can result in payments increasing.
Contact your mortgage servicer or lender to discuss the options for your situation. The longer you wait, the fewer options you'll have. The servicer or lender may be more likely to delay the foreclosure process if you're working with them to find a solution. If you don't reach them on the first try, keep trying.
Yes, you can often pause mortgage payments through a process called forbearance or a repayment holiday, where your lender temporarily suspends or reduces payments due to financial hardship, but you must repay the missed amounts later through a lump sum, repayment plan, or deferral, so always contact your mortgage servicer immediately to discuss options like those from FHA, Fannie Mae, or your specific lender for assistance.