Forbearance Vs. Deferment

Should I apply for forbearance or deferment?

If you’re having trouble paying your mortgage, learn about these two programs that may help you out.

With many people losing their jobs due to the global pandemic lenders are offering forbearance and deferment on their mortgage loans. This is not free money. Therefore, if you can make your mortgage payment, I strongly encourage you to do so. That’s because each lender is different in how they are handling both forbearance and deferment for mortgage loans.

First, if you are in a spot where you cannot make your mortgage payment due to hardship from COVID 19 then you should contact your lender to see what options you qualify for. Not everyone qualifies for forbearance or deferment and each lender is handling this differently. Either way, if you have money in savings, in most cases it would be best to pull that money out of savings and use it to pay your mortgage. That’s because there can be added interest or your payment may be due in a lump sum at the end of your forbearance period.

Rebecca Hansen with Guild Mortgage

Advice from a Local Lender

Rebecca Hansen, with Guild Mortgage, explains the difference between forbearance and deferment. Because these are two very different options that lenders are offering, it’s important to know the difference. In the case of forbearance, it is a grace period before the next payment is due. Some lenders require you to pay all of the missed payments at the end of the forbearance period in a lump sum and others may allow you to spread out the missed payments over time with a loan modification. On the other hand, deferment is when the balance due is added at the end of the loan period.  For example, if you’re 2 years into paying your 30-year mortgage and you qualify for a 3-month deferment, your loan term will now be 28 years plus 3 months.

All in all, it’s important to know that forbearance and deferment is not forgiveness. It’s not free money. It’s important to speak directly to your loan servicer to see what options they offer and what the terms of those options are.