If you find yourself unable to make monthly mortgage payments on your personal or commercial property, you may have options to avoid a foreclosure. Mortgage forbearance and deferment programs allow you to temporarily pause or reduce payments.
Learning the difference between these two forms of mortgage relief can help you make the best choice during a period of financial hardship.
How mortgage forbearance works
Mortgage forbearance lets you pause your mortgage payments for a set period of time. During forbearance, you do not need to pay your regular monthly mortgage bills. Forbearance does not erase what you owe, but it gives you breathing room when you cannot afford your loan.
You must request mortgage forbearance from your lender. If approved, you can stop making payments for several months without fees or foreclosure. At the end of forbearance, you will have options for catching up, such as repaying the missed payments all at once or over time.
How mortgage deferment works
While forbearance temporarily halts your mortgage payments, mortgage deferment is about paying back what you missed. By going with deferment, you delay repaying the payments not made during your forbearance period.
Instead of owing a lump sum when forbearance ends, you wait to settle up through options which include paying at the end of your loan term or when you refinance or sell your property. This provides more flexibility to recover financially before taking on additional mortgage expenses.
Both forbearance and deferment are possible
You do not need to pick either forbearance or deferment, as the two can work very well together. If you cannot provide payments now, forbearance offers temporary relief. When the forbearance period ends, deferment lets you slowly repay what you missed based on your situation.
Before considering alternatives like refinancing, reach out to your mortgage lender if you foresee payment issues. Discuss forbearance to halt payments for a few months. Then explore deferment versus other catch-up programs when forbearance concludes. This combination could help you avoid foreclosure or damaged credit during temporary hardships.
According to the real estate data producer ATTOM, there were nearly 96,000 properties that received foreclosure in the first quarter of 2023, 22% higher than the same quarter in 2022. However, lenders do not automatically insist on foreclosure, with many providing a variety of ways to help clients to not lose their real estate over short-term financial struggles.
