Struggling to pay your mortgage makes for an anxious and frustrating time. The last thing you want is to lose your home. Fortunately, you may have options – one of which is a special forbearance. Depending upon your circumstances, it may be your best option.
What is a forbearance?
Simply put, a forbearance is when your lender allows you to pause in making your mortgage payments. It doesn’t decrease the amount of your loan or relieve you from your future obligations to pay it, but it does give you space to breathe so that you can avoid foreclosure. A forbearance exists for those who have run into temporary financial difficulty, but they expect to turn the corner at some point down the road and resume making mortgage payments.
If your loan is backed by the federal government, such as the Federal Housing Administration, Veterans Affairs or the Rural Housing Service, a forbearance program is in place if you have recently lost your job. Most of the time, there are no fees, penalties or additional interest you’ll be required to pay, although regularly scheduled interest will continue to accumulate while you’re in forbearance.
At the end of the forbearance, you will not be required to make a lump sum payment to catch up. Instead, you will resume your payments as normal. Organizations like the FHA permit a homeowner an initial period of six months forbearance. Should more time be required, an additional six months may be requested. If you’re current on your mortgage at the time you enter forbearance, your lender is required to report you as being current to any credit institutions.