Many people mix up forbearance and deferment under normal circumstances. As more and more mortgage relief programs are being used during the coronavirus, you hear the terms often used interchangeably.
First what is Forbearance. This is when your mortgage lender allows you to temporarily pay your mortgage at a lower payment or pause paying your mortgage. You will have to pay the payment reduction or the paused payments back later.
A mortgage deferment is slightly different from mortgage forbearance. If your mortgage loan lender allows you to defer your mortgage payments for a length of time. The deferred payments are typically added on to the end of the mortgage loan.
With forbearance, interest always continues to accrue, even when payments are paused. When you enroll in deferment, interest may or may not keep building, depending on your lender.
To qualify for forbearance in most cases, you must share with your mortgage company evidence of hardship. You will need to apply for assistance. As part of the application, you may be asked to provide documentation around income and assets. You will also be given the opportunity to describe the nature of the hardship and the need for help.
During the pandemic, some of these requirements have been loosened. Check with your lender to see what they require. .
In general, try to get as much information as possible before accepting mortgage relief during the pandemic. Mortgage deferment and forbearance can be helpful, but you don’t want any surprises down the road that could cause long-term problems.
As with any major financial decision, it’s best to read the fine print, and ask many questions before moving forward with either of these options.
By R. Jones
