Forbearance is when your mortgage lender allows you to pause or reduce your payments for a limited period of time. During the COVID pandemic, many homeowners took advantage of forbearance. It does not erase what you owe. You will have to repay any missed or reduced payments in the future. Forbearance is not loan forgiveness. Borrowers will still owe the principal and interest that they did not pay during the forbearance period. You will typically have several options for repayment once forbearance expires:
1. Full repayment, which is a one-time lump sum payment. It is possible to pay back all the missed payments at once. But lenders are NOT allowed to require this. “If you are unable to pay the lump sum, you have other options.
2. Intermittent payments, where you arrange repayment with your servicer over three, six, nine, or 12 months— whichever makes the most sense — on top of your regular payments.
3. Lengthen your loan term and pay off the missed amount at the end of the extended loan term, with additional mortgage payments.
4. Payment deferral. This option lets you pay off the missed amount when the home is sold, refinanced, or at the end of the loan term.
5. Pursue a loan modification. This helps borrowers who are at risk of default change their mortgage terms – usually including a lower interest rate, reduced length of the loan, or reduced monthly payment.
Talk to your mortgage lender if you find yourself in this situation. The right option for you depends on your current finances, employment status, and ability to resume mortgage payments. Unfortunately, for some homeowners, selling their home to avoid foreclosure may be the only option.
If we can help answer any questions you may have, do not hesitate to call on of our agents.
Rodney McCoy | 601.383.1019 | rmccoy@rightsizerealty.com
Jamie McCoy | 601.259.0461 | jmccoy@rightsizerealty.com
Andrew Tyre | 601.842.4270 | atyre@rightsizerealty.com
Allen Wilson | 601.985.9231 | awilson@rightsizerealty.com
Paul Tyre | 601.709.9002 | ptyre@rightsizerealty.com
Dianne Nelson | 601.421.7094 | dnelson@rightsizerealty.com
References:
Martin, E. (March 26, 2021). What happens when mortgage forbearance ends? Extension and repayment options. The Mortgage Reports. Retrieved from: https://themortgagereports.com/69687/cares-act-mortgage-forbearance-ending-what-to-do