Skip To Content

    Facts about Forbearance

    What is Forbearance? Forbearance is an agreement between a lender and a borrower to temporarily suspend debt payments. For mortgages, lenders may opt to foreclose on borrowers who are unable to make payments. To avoid a costly foreclosure, the lender and the borrower can negotiate a forbearance agreement to allow the borrower to catch up on payments. For student loans, forbearance postpones payments under certain hardship conditions; however, interest continues to accrue on the principal balance.Forbearance Facts that could save you from trouble later…

    3 things to consider about forbearance, before you take action:

    – A forbearance agreement is actually a form of loan default, based on a temporary hardship that allows you to make a reduced payment (or no payment at all) during the terms of the forbearance. Although according to the CARES Act a servicer may not require proof of hardship, this program is not designed for you to take if you are able to make your payments.

    – While the forbearance won’t affect your credit score, it will still be on your credit profile. This means it could be the reason you are denied a mortgage in the future, whether a purchase or a refinance of your current mortgage. It could even stop you from selling your home in the next 6-12 months because you may not be able to get financing for a new home.

    – Your payments are not just tacked on to the end. While this is a possible scenario, this deferment is not the usual process. Instead, it is more likely your missed payments will be due at the end of the forbearance period, in either a lump sum or possibly spread out over a longer timeframe (such as a year). So if you’re able to make your payment now, you won’t have saved anything – you’ll just have a larger payment to make in a few months and have affected your ability to obtain a future mortgage in the process.

    If you’d like to know more about your options, please contact me anytime and we can talk about it. I can put you in touch with a mortgage professional who can help.

    Trackback from your site.

    Leave a Reply

    Testimonials

    It was a pleasure working with Kyle Bender and his team at Scarlett Real Estate! Kyle went above and beyond to help us in selling our townhouse! From listing to closing of our home, Kyle was very responsive, kind and a constant professional! Thank you Kyle Bender and Scarlett Real Estate! A++
    Pineville, NC