The Difference Between Mortgage Deferment and Forbearance

The Difference Between Mortgage Deferment and Forbearance

 

More homeowners are in search of mortgage relief due to the COVID-19 pandemic, and options like mortgage deferment and mortgage forbearance are becoming readily available to those in need.

But “we are seeing the terms being used interchangeably,” Sara Singhas, director of loan administration for the Mortgage Bankers Association, told realtor.com®.

Mortgage deferment and mortgage forbearance allow borrowers to temporarily stop making their monthly payments, but they differ in what happens afterwards. At the end of a forbearance period, the amount of payments missed are due in a lump sum, Singhas explains. However, lenders may choose to work with borrowers to structure a payment plan.

On the other hand, deferment is allowing borrowers to repay the money over time or add it to the end of their loan period.

“Technically, a mortgage forbearance agreement is when you’ve possibly been late, and the lender agrees not to foreclosure during that forbearance period,” Krista Allred, a mortgage loan originator, told realtor.com®.

In the current landscape, many borrowers haven’t become past due on their mortgage yet. But an the pandemic causes unemployment numbers to rise, borrowers are in a rush to seek help before they default.

“The moral of the story right now is to call your lender,” Allred says. “Don’t just assume you can skip a payment. Call them, let them know, and make arrangements.”

Forbearance and deferment aren’t the only options. Some lenders are doing loan modifications, too.

The bottom line is that lenders want to remind consumers: Nothing is free.

“It’s not free mortgage payments; it’s not free money. [Forbearance] is temporarily hitting the pause button on your mortgage, and not having to make the payment,” Mary Bell Carlson, a certified financial planner who operates a blog under “Chief Financial Mom,” told realtor.com®. “It does not necessarily pause the interest that is accruing, and it does mean that you’re going to have to make that principal and interest payment at a later date.”

Source: “Mortgage Deferment and Mortgage Forbearance—Is There a Difference?” realtor.com® (April 7, 2020)

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Sabrina Caton - The Caton Team - Realtors

Sabrina & Susan are native Californians - born and raised in the Silicon Valley with a passion for Residential Real Estate. A mother and daughter-in-law duo called - The Caton Team. With over 35 years of combined, local Real Estate experience and knowledge – would’t you like The Caton Team to represent you? Let us know how we can be of service. Contact us any time. Call | Text at: 650-799-4333 | Email Info@TheCatonTeam.com The Caton Team believes, in order to be successful in the San Fransisco | Peninsula | Bay Area | Silicon Valley Real Estate Market we have to think and act differently. We do this by positioning our clients in the strongest light, representing them with the utmost integrity, while strategically maneuvering through negotiations and contracts. Together we make dreams come true. The Peninsula is our backyard - let us help make it yours. We represent Buyer’s and Seller’s throughout the Bay Area. The Caton Team – Susan & Sabrina A Family of Realtors Effective. Efficient. Responsive. What can we do for you?

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