Mortgage forbearance is a financial strategy that can help homeowners struggling with their mortgage payments due to a financial hardship. It is an agreement between the homeowner and the lender that allows the homeowner to temporarily reduce or suspend their mortgage payments for a certain period of time. This can provide much-needed relief for homeowners who are facing financial difficulties.
Forbearance is not a permanent solution, however, and it’s important to understand the implications of this strategy before deciding to pursue it. Here’s what you need to know about mortgage forbearance and how it can help you in a financial crisis.
First, it’s important to understand that mortgage forbearance is not a loan modification. It does not reduce the amount of your loan or change the terms of your loan. Instead, it simply allows you to temporarily reduce or suspend your payments for a certain period of time. This can be beneficial if you are facing a short-term financial hardship, such as a job loss or medical emergency.
When you enter into a forbearance agreement, you will need to make up the missed payments at some point in the future. This can be done in one lump sum or through a repayment plan. It’s important to understand that the missed payments will still be due and that interest will continue to accrue on them during the forbearance period.
It’s also important to understand that entering into a forbearance agreement can have an impact on your credit score. Your credit report will show that you have missed payments, which can lower your score. However, if you make all of the payments on time after the forbearance period ends, your score should eventually recover.
Finally, it’s important to remember that mortgage forbearance is not a long-term solution to financial difficulties. It’s important to explore other options, such as refinancing or loan modification, if you are facing long-term financial hardship.
Mortgage forbearance can be a helpful strategy for homeowners facing short-term financial hardship. However, it’s important to understand the implications of this strategy before deciding to pursue it. Make sure you understand how it will affect your credit score and how you will make up the missed payments in the future. If you are facing long-term financial hardship, explore other options such as refinancing or loan modification.