During the height of the pandemic, mortgage forbearance provided a critical lifeline to millions of homeowners. However, many homeowners who enrolled in a CARES Act forbearance program have since seen their plans conclude.
If your forbearance is nearing its expiration date, you’ll have plenty of repayment options before reaching your mortgage forbearance end date. You may be able to refinance, modify your loan term, or even apply for an extension. Be sure to speak with your lender about your repayment and forbearance options. Here’s what you can expect.
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The specific end of the forbearance depends on several factors, including the type of mortgage, the terms of the forbearance agreement, and the policies of the loan servicer or lender.
The federal government passed the Coronavirus Aid, Relief, and Economic Security (CARES) Act on March 27, 2020, in response to the COVID-19 national emergency’s economic impact.
Among other aid measures, the CARES Act provided mortgage relief for homeowners with federally backed mortgages, allowing them to pause or reduce their mortgage payments for up to six months, with the option to extend for an additional six months of forbearance.
When your mortgage forbearance period ends, you will need to resume making your regular mortgage payments unless you have made alternative arrangements with your mortgage servicer.
“Forbearance is not loan forgiveness.” Borrowers will still owe the principal and interest that they didn’t pay during the forbearance period, notes Dongshin Kim, assistant professor of finance and real estate at Pepperdine Graziadio Business School.
A loan modification can change the terms of your mortgage, such as reducing the interest rate or extending the term of your loan, to make your monthly payments more affordable. You can contact your mortgage servicer to explore this option.
This approach involves repaying the missed amount over 3 to 12 months in addition to your regular monthly mortgage payments.
It’s 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,” says Jackie Boies, senior director of housing services at Money Management International.
This option lets you pay off the missed amount when the home is sold or refinanced, or at the end of the loan term.
Refinancing your mortgage can help you secure a lower interest rate or extend the term of your loan, resulting in reduced monthly payments. However, this option is only available if you have enough equity in your home and a good credit score.
If you can’t pay your mortgage and have no other options, you might need to think about selling your home to keep it from going into foreclosure. It can be hard to decide to sell your house, but it may be the best way to protect your credit score and your financial future. It’s critical to consult with a real estate agent or a financial adviser to determine the best course of action.
A deed in lieu of foreclosure is an option where you voluntarily give your home back to the lender to avoid foreclosure. Although this option can mitigate the negative impact on your credit score, it may not be an ideal choice if you want to keep your home.
For homeowners who are unable to resume regular mortgage payments after a forbearance period, refinancing can be a viable solution. Here’s how it works:
To refinance after a forbearance period, you will typically need to meet the lender’s eligibility criteria, which may include having a good credit score, a stable income, and sufficient equity in your home. Documentation of your income, employment, and proof of being current on your mortgage payments may also be necessary.
It’s important to explore all of your options and work with your mortgage servicer to find a solution that works best for your situation. Refinancing after a forbearance period can be a viable option for some homeowners, but it’s important to weigh the costs and benefits before making a decision.
The waiting period to refinance after a forbearance period varies depending on the type of loan.
For most major loan types, including conventional, FHA, and USDA loans, you typically need to have made at least three consecutive payments after exiting forbearance in order to be refinance-eligible.
Refinance waiting periods on FHA loans may be less than three months for some borrowers who qualify for a Streamline Refinance.
The VA loan program is even more lenient. The Department of Veterans Affairs does not have a set amount of time you have to wait before you can refinance after a forbearance. It only says VA lenders must verify that the borrower has recovered from their financial hardship.
Keep in mind that refinance requirements will vary by lender. If your current mortgage lender wants to impose a longer waiting period to refinance, shop around for a different lender that can help you refi sooner.
As long as you meet basic credit, income, and debt requirements, you shouldn’t have to wait longer than three months after your forbearance plan ends to refinance.
About to reach your mortgage forbearance end date? You can sometimes get a forbearance extension if you are still having trouble with money and can’t make your mortgage payments when your initial forbearance period is over. However, whether you can get an extension depends on your individual circumstances and the policies of your mortgage servicer.
If you’re currently in a mortgage forbearance and need an extension, you should contact your mortgage servicer as soon as possible to discuss your options. Here are the steps to follow:
Yes, in most cases, you can end your forbearance plan early if you are able to resume making your mortgage payments. Here are the steps you should follow:
Mortgage forbearance is an agreement between a borrower and a lender that lets the borrower temporarily stop making mortgage payments or cut them down. During a forbearance period, the borrower may not have to pay the full amount of their mortgage, but they may still have to pay the interest on the loan. The length of the forbearance period and the terms of the agreement may vary depending on the lender and the borrower’s individual situation.
Can I start a new mortgage forbearance right now?Whether you can start a new mortgage forbearance right now depends on your individual circumstances and the policies of your mortgage servicer. If you are eligible for a new mortgage forbearance, you should be aware that forbearances are not a permanent solution to mortgage payment problems. While a forbearance can provide temporary relief, it’s important to have a plan in place for how you will make up the missed payments when the forbearance period ends.
Can mortgage forbearance be forgiven?No, a mortgage forbearance cannot be forgiven. Forbearance is a temporary agreement between you and your mortgage servicer that allows you to temporarily pause or reduce your mortgage payments for a specified period of time due to a financial hardship.
Can I use equity to pay off forbearance?Yes, you may be able to use the equity in your home to pay off the missed payments from your forbearance period. Some popular options to consider include home equity loans, cash-out refinances, and selling your home. Keep in mind that using equity to pay off missed payments may not be the best option for everyone, as it can result in higher monthly payments or a longer loan term.
Can I buy a new house after mortgage forbearance?Yes, it is possible to buy a new house after a mortgage forbearance. However, the specific requirements and guidelines for a home loan approval can vary depending on the lender and the type of loan you are applying for.
What if you still can’t afford your mortgage payments after forbearance?If you’re still unable to afford your mortgage payments after a forbearance period, there are a few options that you can explore: loan modification, loan refinancing, selling your home, or a deed in lieu of foreclosure. It’s important to explore all of your options and work with your mortgage servicing company to find a solution that works best for your situation.
How does forbearance affect my ability to buy a home?If you have recently gone through a mortgage forbearance, it is important to understand the impact it may have on your credit score and financial situation. A forbearance can temporarily pause or reduce your home loan payments, but it does not eliminate your debt. You will still be required to repay the missed payments in the future, and this may affect your debt-to-income ratio and overall creditworthiness.
If your mortgage forbearance plan is nearing its end date, you have several options available to you. As long as your initial forbearance was under the CARES Act, your loan servicer is prohibited from requiring you to repay all the missed payments at once.
Take the time to carefully explore and consider your options, ensuring that you find a repayment plan you’re comfortable with. The best choice for you will depend on your current finances, job, and ability to resume regular mortgage payments. When you contact your loan servicer, be sure to discuss each available option in detail so you have a clear understanding of what to expect from the repayment plan you ultimately choose.