If you’re experiencing difficulty making your mortgage payment, a mortgage forbearance along with a deferment may provide much-needed relief from a financial hardship. However, it’s important to realize that although the terms are sometimes used interchangeably, forbearance and deferment don’t mean the same thing. The way each works will affect whether a mortgage forbearance versus a deferment is right for you.
The big difference between a forbearance versus a deferment is that forbearance allows you to pause or reduce your mortgage payment, while deferment allows you to postpone your overdue mortgage payments. Deferment may be a post-forbearance option to help make your mortgage current. A deferment typically moves any missed payments to the end of your loan to be paid when you pay off your mortgage.
The chart below touches on the main differences, but we’ll dive deeper into these in the following sections.
When a borrower needs to catch up on overdue payments due to a financial hardship that has led to the inability to make mortgage payments
Proof of a financial hardship
Who the mortgage servicer is, how many payments were missed and whether the borrower can afford to resume monthly payments
Mortgage forbearance is a temporary pause or reduction in your mortgage payments. Homeowners who request forbearance are often experiencing some sort of temporary financial hardship. This might be dealing with a job loss, the impact of a natural disaster or an unexpected medical expense.
When you enter a mortgage forbearance, your mortgage payments are paused or reduced for a period of time decided by your lender. The paused payments aren’t forgiven but repaid at the end of either the forbearance period or the loan term, along with the accrued interest.
Keep in mind that resuming your monthly payments after your loan term could essentially extend your loan term. Missed payments could also be repaid in full, or the paused or reduced amounts could be added to your monthly mortgage payments. In this case, your monthly payment could increase when repayment resumes.
If you’ve previously been on biweekly payments, any options you have upon exiting forbearance are only designed to bring your loan current. In order to take advantage of biweekly mortgage payments, you need to be a month ahead to start with because you’re only making half a payment on the initial due date.
Forbearance timelines can vary depending on the reason for the forbearance, so speak with your loan servicer. A mortgage servicer is whomever you make your payment to. If you have an escrow account to spread out property tax and insurance payments, they’ll maintain that as well. This may or may not be the lender with whom you did your mortgage.
To qualify for forbearance, you typically have to share with your mortgage servicer evidence of hardship. In some instances, such as forbearances requested after natural disasters, these rules are modified. However, in general, the following rules apply:
Your servicer will have you share information about your situation. Rocket Mortgage ® clients can fill out an Application for Success. As part of that application, you may be asked to provide documentation around income and assets and any bills or other expenses. You’ll also be given the opportunity to describe the nature of the hardship and the need for help.
If you’re experiencing financial trouble, your servicer will want to do everything they can to help keep you in your home.
Once the forbearance is over, you have to pay back any missed payments, so it’s helpful to pay what you can during the forbearance.
Deferment is just one repayment option. This all depends on your mortgage investor, what options you qualify for and the type of forbearance you’re applying for. Here are a few other options:
Also, depending on the terms of your forbearance with your servicer, you may or may not have to pay more in interest and other fees due to paused payments. Make sure to be clear with your servicer as to what the agreement is.
A mortgage deferment is an option for dealing with overdue mortgage payments.
Also referred to as a partial claim, mortgage deferment involves taking the payments you missed and setting them aside to be paid at the end of your loan. The ending may be when you pay off your mortgage, refinance or sell the home.
Whether deferral is an option for you depends on who your mortgage investor is, how many payments have been missed and your ability to resume making your regular monthly mortgage payment.
If you can no longer afford your original payment, you may have to look into other options, such as a loan modification. Or you may have to explore the possibility of selling your home if it’s unlikely you’ll be able to afford it long term.
Whether and how a forbearance affects your credit depends on your situation and the type of forbearance you’re approved for. However, in most cases, you’ll likely see a negative impact on your credit. That’s why it’s best to talk to your servicer before choosing either option.
Beyond the actual impact on your credit score, you should be aware that having a forbearance in your past may or may not lead to waiting periods before you can apply for certain types of mortgages to purchase or refinance a home.
Remember that lenders may offer forbearance and deferral options when borrowers experience financial hardships. Forbearance allows you to pause or reduce your mortgage payment, while deferment allows you to postpone your overdue mortgage payments. Deferment is one possible repayment option when exiting forbearance. With a deferment, past-due monthly payments are set aside to be paid by the end of the loan.
There are various types of forbearance with different effects on credit and your future mortgage qualification ability. In talking about both the forbearance itself and your repayment options, the best thing to do is speak with your servicer.
If you’re experiencing financial difficulty, check out our article on mortgage help for more information on paying your mortgage.
Kevin Graham is a Senior Blog Writer for Rocket Companies. He specializes in economics, mortgage qualification and personal finance topics. As someone with cerebral palsy spastic quadriplegia that requires the use of a wheelchair, he also takes on articles around modifying your home for physical challenges and smart home tech. Kevin has a BA in Journalism from Oakland University. Prior to joining Rocket Mortgage he freelanced for various newspapers in the Metro Detroit area.