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If you're struggling to pay your mortgage loan, it's important to know that you have options to help you avoid losing your home. Both mortgage forbearance and deferment can provide some much-needed relief to homeowners in need.
To help you understand your options, we'll take a look at mortgage forbearance vs. deferment, explain the pros and cons of each, and show you how both of these mortgage relief programs can help keep you from falling behind on your mortgage payments.
Mortgage forbearance is an arrangement with a lender. It is a form of mortgage relief that allows you to temporarily pause payments on your home loan without risking foreclosure. You also won't face late charges during this time. These payments aren't forgiven, and you will have to repay the missed payments when forbearance ends. But for the time being, you don't have to make mortgage payments.
Most lenders will offer a forbearance plan for struggling borrowers who can't afford their bills. The federal government also mandated lenders make forbearance available during the COVID-19 pandemic. This mandate applies to federally-backed or sponsored loans. Forbearance is not automatic and must be requested -- even during the pandemic.
The term mortgage deferment is sometimes used interchangeably with mortgage forbearance. However, it isn't the same. Forbearance means your lender has allowed you to pause loan payments. Deferment is an option for catching up on missed payments while your loan is in forbearance.
When you pause payments under forbearance, you must make them up. Sometimes, you're required to make a lump-sum payment at the end of the forbearance period. On the other hand, deferment allows you to wait to catch up on these back payments.
With mortgage deferment, you'll make up the missed payments at the end of your loan repayment period. You can also choose to pay it back when you sell the home or after refinancing your mortgage.
You don't have to choose between mortgage forbearance vs. deferment. They can go hand in hand. But they are not the same.
Also, you can choose forbearance without deferred payments. This would pause payments during a time of hardship until forbearance ends, when you would make a lump-sum payment. Unfortunately, this option isn't available to those who cannot come up with a large sum of money immediately upon exiting forbearance.
There are pros and cons to consider when choosing mortgage forbearance or opting for deferment.
The biggest advantages of mortgage forbearance include:
The biggest disadvantages include:
The biggest advantages of mortgage deferment include:
The biggest disadvantages of mortgage deferment include the following:
You don't have to choose between deferment and forbearance. If you are worried about missing mortgage payments, contact your lender ASAP. Ask about forbearance options. Forbearance is better than alternatives, such as foreclosure.
Once your forbearance period ends, explore all your options. You could make a lump-sum payment. Another option is agreeing to a payment plan, which would mean paying extra money on top of each monthly payment. You'd do that to make up for the missed payments while your loan was in forbearance. Or you could opt for deferment and make up missed payments later.
Alternatives to forbearance include:
Alternatives to deferment include:
The alternatives available will depend on your credit score, your income, the options your lender makes available, and your overall financial situation.
Here are some other questions we've answered:
Refinancing your mortgage could save you hundreds of dollars for your monthly mortgage payment and secure you tens of thousands of dollars in long-term savings. Our experts have reviewed the most popular mortgage refinance companies to find the best options. Some of our experts have even used these lenders themselves to cut their costs.
Mortgage forbearance pauses payments during times of financial hardship. Mortgage deferment is one option for how you will catch up on the back payments that built up while your loan was in forbearance.
You can request forbearance from your lender if you can't make mortgage payments. If approved, you will not have to make payments for a period of time. You won't be subject to late fees or risk foreclosure during your period of nonpayment. But you will still owe the money.
Deferment allows you to make up for the missed payments later. You'll pay them at the end of your mortgage or when you sell or refinance. It's an alternative to making a lump-sum payment. It's also an alternative to a repayment plan, which would involve adding extra money onto each monthly mortgage payment to make back payments.
Neither forbearance nor deferment is better than the other. They serve different purposes. Forbearance helps you cope with financial hardship. It does so by allowing you to temporarily stop making mortgage payments. Deferment is a method of making up for those missed payments by paying them later instead of immediately when forbearance ends.
You do not have to choose between mortgage forbearance or deferment. You can put your mortgage loan into forbearance to stop making payments temporarily. You will need to request forbearance from your lender.
Once forbearance ends, your lender may offer several options for making up for missed payments. This includes a repayment plan that temporarily increases payments to make up for those you missed. Or it could include an immediate lump-sum payment.
Deferment is another option. It allows you to make up the missed payments later rather than right after forbearance ends.
By deferring payment of the money you didn't pay during forbearance, you have more time to recover from your economic hardship. You don't immediately exit forbearance and have to pay a large sum of money or higher monthly mortgage costs.
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