Mortgage forbearance is a short-term agreement between a borrower and a mortgage servicer to pause or reduce mortgage payments.
Typically, forbearance lasts no longer than 12 months. You can use it to avoid late payments on your mortgage during a temporary financial hardship. But if you’re going through long-term problems, you may want to consider other options.
How to Get Mortgage Forbearance
You can’t go into forbearance without working with your mortgage servicer. For the best outcome, plan to contact it as soon as possible. Once you start missing mortgage payments, the situation can get complicated.
“As soon as you think you’re headed towards trouble, it’s a good idea to let them know what you’re facing,” says Bruce McClary, senior vice president of membership and media relations at the National Foundation for Credit Counseling. “They appreciate the fact that you’re being proactive in reaching out to help identify solutions to keep the mortgage on track.”
Your servicer will be able to outline its specific hardship options and determine whether you qualify. You may be eligible if you’re going through a temporary income decline related to a job loss, natural disaster or illness, for example.
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Will Mortgage Forbearance Affect My Credit Score?
Mortgage forbearance likely won’t affect your credit score on its own. If you have already made a late payment that your servicer reported to the credit bureaus, you could see your credit impacted from that. Your credit reports may note that your loan is in forbearance, which could affect your ability to qualify for other credit, but it won’t bring down your score.
Pros and Cons of Mortgage Forbearance
Broadly, forbearance may be a good fit if you expect your financial stress to be short term and you want to avoid a more drastic step, such as a mortgage loan modification.
Pros
— Could help you avoid late payments and foreclosure. If you’re going through a short-term financial hardship, forbearance could provide the cushion you need to protect your credit and your home.
— May provide multiple exit pathways. Your servicer may offer more than one way to exit forbearance, including working your new balance into your regular payments until it’s paid off. With more options, you’re more likely to find a feasible repayment path.
— You’ll get to keep your existing loan. In theory, you could refinance your home loan to unlock lower monthly payments in exchange for a more expensive loan overall. But homeowners who have a loan with an ultra-low interest rate from 2020 or 2021 would probably prefer to keep their existing loan. Forbearance can make this possible.
Cons
— Won’t provide long-term relief. Forbearance is designed to give you a little time to get your finances back on track. If you expect that your situation has changed for the long term, you’ll want to consider other options.
— Can complicate refinancing plans. You probably won’t be able to refinance while you’re actively in forbearance. After forbearance ends, you’ll probably need to make at least three on-time payments to be eligible for a refinance.
— Could complicate repayment later. When you exit forbearance, your servicer might expect you to repay the entire amount you suspended at once. Other pathways exist (and your servicer must offer other options if you have a government-backed mortgage), but you’ll need to have a conversation to make sure you have an agreed-upon path forward.
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How to Get Out of Mortgage Forbearance
Depending on your loan type, your loan servicer and the terms of your original forbearance, your options at the end of the forbearance term can include the following:
— Extend your forbearance. You may be able to add additional months to your original forbearance.
— Enter a repayment plan. You may be able to incorporate the balance you missed on your forbearance (with any interest and fees) into your remaining mortgage payments until you’ve paid it off.
— Defer your missed payments. In this case, you’ll go back to making regular mortgage payments, and the balance you owe from your forbearance will become a lien that you’ll have to pay off at the end of your loan term, when you sell your house or when you refinance your original loan.
— Repay the entire balance you missed during forbearance. You could pay off everything you deferred during forbearance (with any interest and fees) and go back to your previously regular mortgage payments.
— Make a loan modification. If your financial situation after forbearance would still make keeping up with your regular mortgage payments challenging, you could consider extending your mortgage term and adding your forbearance debt to the total loan balance. This can give you lower monthly payments, but you’ll ultimately owe more over the life of your loan.
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Alternatives to Mortgage Forbearance
If you expect longer-term financial challenges, you may consider leaving your home instead of forbearance. In this case, your options can include a regular sale, a short sale or a deed in lieu of foreclosure.
A mortgage forbearance isn’t your only option to help you stay in your home without falling behind on payments, though. A good way to begin evaluating your options is to work with an expert who can evaluate your whole financial picture.
Work With Experts to Manage Your Financial Situation
You can reach out to a housing counselor who works for an agency approved by the Department of Housing and Urban Development before you decide on forbearance. Some housing counselors are also nonprofit credit counselors, so you can take a look at your entire financial situation.
“They can also give you some objective advice about your options and what the most suitable path should be based on your circumstances,” McClary says. “It can give you information about whether or not a forbearance specifically is the best step, or are there other things you need to consider that might be more suitable based on your circumstances.”
For example, you may be able to find ways to better manage unsecured debt, such as credit card debt, to relieve pressure from your budget without going into forbearance.
“If you enroll in a debt management plan with a nonprofit credit counseling agency and you benefit from the reduced interest rates, the elimination of late and over-limit fees, and the adjusted payments that are more right-sized for your budget,” says McClary, “I mean, presto, that alone may fix things.” However, in some cases, you won’t be able to get a complete fix with this approach.
Tap Into Your Home Equity
Leveraging the equity in your home may be another way to get temporary relief for, say, a six-month hardship.
“You can potentially go in, qualify for a closed-end second (mortgage) or a fixed-rate (home equity line of credit) program. You can get through that period of the next six months with these,” says Cameron Findlay, executive vice president of capital markets at online mortgage lender AmeriSave. “You’re not going to go into default on your home as long as you have a strong confidence you’ll be able to get a job at the end of six months, let’s say.”
Consider a Loan Modification
A loan modification can mean extending your loan term to 40 years to get lower monthly mortgage payments. In this case, you’ll end up paying more overall, so be wary before choosing this option.
“If you do the math and you look at the 40-year payments versus 30-year, the economics aren’t good. You’ll pay a lot more in costs,” Findlay says.
Still, you can consider a loan modification if you want to keep your home but won’t be able to keep up with your current monthly payments in a sustainable way.
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What Is Mortgage Forbearance? originally appeared on usnews.com
Update 06/02/25: The story was previously published at an earlier date and has been updated with new information.
