If you’ve been following the latest coronavirus news coverage, you might have heard that the CARES Act stimulus package is requiring mortgage servicers to allow forbearance for homeowners.

Mortgage forbearance is a temporary postponement or reduction of your monthly mortgage payments.

If you’re considering mortgage forbearance as an option for temporary financial relief, there are a few critical points to consider before moving forward. Here’s what you need to know.

How Mortgage Forbearance Works

Keep in mind; mortgage forbearance is not the same as mortgage forgiveness. Forbearance doesn’t erase your monthly mortgage payment. After your forbearance period ends, you are still responsible for making up for any missed payments.

When the forbearance period is over, your mortgage servicer might offer any of the following options for repayment:

• Catch up on deferred payments with a one-time payment
• Spread out the deferred payments over the life of the loan
• Add the deferred payments in the form of a non-interest-bearing loan on to the back of the existing mortgage term

Should I Use Mortgage Forbearance?

Think of mortgage forbearance as a last resort safety net for those that are unable to make their mortgage payments for a short period of time. While it’s an option to consider in an emergency, it’s not an easy solution for a temporary break from making your monthly payment.

If you can make your mortgage payment, you should continue to do so. Otherwise, you may end up having to pay your regular payment plus additional payments to cover the period you postponed payment.

What You Can Do If Considering Mortgage Forbearance

If you need forbearance, first get in touch with your mortgage servicer. If you are unsure who services your mortgage, check your mortgage statement for contact information.

Next, determine if your mortgage is backed by the federal government to ensure that your mortgage is eligible for the protections outlined by the CARES Act:

• A foreclosure moratorium
• A right to forbearance for homeowners who are experiencing financial hardship due to the COVID-19 emergency

Federally backed mortgages include:

• VA
• FHA
• HUD
• USDA
• Fannie Mae or Freddie Mac

Finally, be prepared to answer questions about how the virus has impacted your finances, and ask questions about repayment terms:

• When are the postponed payments due?
• What fees will incur if I struggle to catch up on the postponed payments after the forbearance period?
• How will all of this affect my credit, and my ability to borrow money in the future?

To be eligible for forbearance, you must set it up with your servicer before you postpone any payments. If you miss payments without going through the official forbearance process it will harm your credit and cause financial headaches in the future.

The Bottom Line

Be smart, consult with your loan officer and other trusted financial professionals. If you don’t need the emergency life jacket, leave it in the boat.

If you do need it:

• Get specific repayment terms in writing, and make sure the terms will be manageable for you.
• Keep a close eye on your mortgage statement and credit report to ensure accuracy
• Contact your mortgage servicer and resume your payments as soon as your financial situation allows. The shorter the forbearance period, the easier it will be to get back on track.

As always, we’re only one phone call away and ready to help you find answers to all of your mortgage questions.