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Key takeaways
- Mortgage forbearance allows you to pause your mortgage payments, usually for up to six months, when you have a financial hardship.
- When forbearance ends, you may ask for an extension, modify your existing loan or refinance to a more affordable mortgage.
- Talk with your mortgage lender or servicer to discuss your options and choose the best one for your situation.
Mortgage forbearance gives borrowers experiencing financial hardship a temporary break on payments. But what happens when the break ends? Knowing your post-forbearance options is important so you are prepared when it’s time to start making payments again.
When does mortgage forbearance end?
An initial mortgage forbearance period can last from three to six months — more likely six, now that the pandemic protections have expired. Beyond that, you’ll need to ask your lender for an extension if you’re still struggling financially when the first forbearance period ends. Most loans can go into forbearance for up to 12 months, some even longer.
How to request a forbearance extension
- Call your mortgage lender or servicer and ask if you qualify for a forbearance extension. If you don’t communicate with your lender and are taken out of forbearance then fail to make payments, you’ll harm your credit and potentially lose your home to foreclosure.
- If your lender cannot offer you a forbearance extension, ask them what options exist to help you avoid default.
How to repay your mortgage after forbearance
Make a deferred payment
Who it’s best for: You can afford to restart payments but can’t afford to make higher payments.
How it works: Ask your servicer if you can defer any missed payments until you sell your home or refinance after forbearance. By doing so, you’ll simply pay off what you owe when the mortgage ends.
Establish a repayment plan
Who it’s best for: You have extra cash to add to your regular payments to repay the amount you owe.
How it works: You’ll eventually need to repay the skipped payments you missed in forbearance. Consider these potential options to catch up:
- Lump-sum payment. You’ll pay back what you owe with a single lump-sum payment, also called reinstatement.
- Short-term repayment plan. This option allows you to repay what you owe over six months.
- Extended loan modification. If approved for a mortgage loan extension, the amount of time your payments were deferred during forbearance will be added to the end of your loan.
- Cap and extend. This option involves the lender making payments for you during forbearance and then applying the amount it paid to your principal balance and extending your term.
Modify your loan
Who it’s best for: You can’t afford your existing mortgage payment anymore and need long-term relief.
How it works: Depending on your lender, you might be eligible for a loan modification. This involves permanently changing your mortgage terms, like the repayment period, interest rate or principal balance, to make the monthly mortgage payments more affordable.
You’ll have to resume payments if the lender agrees to modify your loan once your forbearance ends. If you have a loan backed by Fannie Mae or Freddie Mac, ask your lender about the Flex Modification program.
To request a loan modification, you’ll need to:
- Gather financial documentation to plead your case to your lender, including proof of financial hardship. Be mindful that a loan modification is sometimes only offered to borrowers who can demonstrate that the current payment is unaffordable.
- Contact your lender or servicer and ask for a loan modification. They’ll have you fill out and submit an application.
- If you are denied, you might be able to request an appeal.
Sell your home
Who it’s best for: If you can’t catch up on or afford payments and you’re at risk of foreclosure.
How it works: Your lender or servicer typically wants to avoid foreclosing on your home as much as you do. If you’re open to relocating, selling your home could be a way to avoid foreclosure. However, make sure the new math works in your favor; current home prices and mortgage rates are notably higher than they were a few years ago.
“A lot of these borrowers have equity in their homes, so they can sell their current houses and use that equity to help pay off their existing mortgage and possibly fund a down payment on a cheaper house or at least put some money into savings after the sale,” says Marina Walsh, vice president of Industry Analysis at the Mortgage Bankers Association.
“Another option if they don’t want to proceed with the foreclosure route and they’re willing to move, there are programs like Cash for Keys, in which the lender assumes the title of the home, but might provide the borrower with some relocation assistance to help them settle in a new, more affordable housing situation,” says Walsh, adding that a borrower and their lender might also consider a short sale. That’s when you sell your home, and even if the proceeds are not enough to pay off the full mortgage, the difference is essentially forgiven.
Refinancing after mortgage forbearance
Another possibility: Refinance your loan to a new one with a lower, more manageable payment. This isn’t always feasible, however, especially because you were struggling financially to begin with. However, you might be able to get a low-cost refinance to help cut costs. You will need to have at least a 620 credit score and enough equity in your home, usually 20 percent, to qualify for a refinance.
In addition, you typically cannot apply for a refinance immediately after coming out of forbearance. Many lenders require what is known as a “waiting period” after forbearance before they will approve a refinance. The length of the waiting period varies by your loan type and lender, so be sure to reach out to your lender about its requirements for refinancing after forbearance.
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