Q: Why Should I Not Take Forbearance?
Let’s discuss forbearance. When the pandemic became widespread, you may have started to hear about forbearance a lot. Forbearance is when mortgage lenders and banks allow you to defer payments for 90 to 180 days. That sounds wonderful, but the problem is, we have people taking advantage of forbearance when they could actually pay their mortgages.
Why does this matter? It matters because this is not forgivable deferment; your mortgage payment will eventually be due in one lump sum. For example, if it’s hard to pay $2,000 a month right now, imagine having to pay perhaps $10,000 later. The result of this could be foreclosure.
“Forbearance is when mortgage lenders and banks allow you to defer payments for 90 to 180 days.”
Beware: Do not take a vacation from your payments if you can pay them. This will also affect your credit—news about how that will manifest comes out daily. If you have taken a forbearance, you will not be able to refinance your home. Also, if you took a forbearance, even for just a month, and you sell your house, your loan for another home will most likely be denied. So be cautious.
Here are a few more things you should know about forbearance:
• If you do choose forbearance, most servicers are requiring that the payments be due in one lump sum after the 90-180 days is over instead of getting added to the end of the loan term. It is important to check with your specific servicer.
• While taking forbearance is not supposed to be a derogatory event to your credit, there are servicers who are adding language in the credit report that the loan is in forbearance. If you are looking to get a new mortgage or do a refinance, that will likely impact your ability to take out a new loan.
However, if you truly need forbearance, it can help those who need it. I’d be glad to put you in touch with local, astute lenders who can help you navigate the process. The very best thing you can do is talk to your lender, learn the guidelines they’ve laid out for forbearance, and if you can, make your payments!
We’re always here to be a resource for you, please reach out by phone or email if you have any questions. We would love to help you. Stay safe out there.