Options after a forbearance plan or resolved hardship (2024)

FAQs

Options after a forbearance plan or resolved hardship? ›

Key takeaways. Mortgage forbearance allows you to pause your mortgage payments, usually for up to six months, when you are having a financial hardship. When forbearance ends, you may ask for an extension, modify your existing loan or refinance to a more affordable mortgage.

If you get a forbearance, you're still responsible for the interest that accrues while you're not making payments. After your forbearance ends, you'll pay off your accrued interest through normal monthly payments. For most loan types, interest won't capitalize at the end of a forbearance.

How it works: With a loan modification, your payment can be reduced to an affordable amount and all or some of your missed payments are added to the amount you owe. Your monthly payments could also be lower, but it could take longer to pay off your loan.

Forbearance is a process that can help if you're struggling to pay your mortgage. Your servicer or lender arranges for you to temporarily pause mortgage payments or make smaller payments. You still owe the full amount, and you pay back the difference later.

Most lenders give you these options: A lump sum payment, which means paying the entire amount you missed all at once. A short-term repayment plan or a loan modification, which is usually an additional monthly charge on top of your regular mortgage payment to make up that difference.

If you're pursuing loan forgiveness, any period of deferment or forbearance may not count toward your forgiveness requirements. This means you'll stop making progress toward forgiveness until you resume repayment.

If a borrower opts for forbearance while the department considers the application, their loans will only accrue interest for the first 180 days. After that, the borrower won't need to make loan payments, and interest won't accrue until the department issues a decision.

To be eligible for a new home loan after forbearance — whether a refinance or purchase — you'll need to reestablish yourself as a credible borrower. Lenders' requirements will vary, but you will likely need at least 12 months' worth of on-time payments after the end of your forbearance.

In short, it depends on your loan type and your repayment activity. For conventional loans (i.e. loans backed by Fannie Mae or Freddie Mac), you'll need to take your mortgage out of forbearance and make three consecutive payments before you can refinance.

What is reinstatement after forbearance? ›

Reinstatement. The homeowner pays back any missed amounts at once if financially able to do so. After the reinstatement, the homeowner continues to pay their mortgage under the original terms of their mortgage loan.

Generally, you can qualify for a loan modification if you've had an income loss or reduction that caused you to miss your mortgage payments. Or you have to be in imminent danger of falling behind on payments. But you must have sufficient income to make modified payments.

Fannie and Freddie Flex Loan Modification Guidelines

you must have suffered an eligible financial hardship. you must have a stable income that will support a monthly payment and. you must have taken out your mortgage at least 12 months before being evaluated for a Flex Modification.

When it ends, you'll be expected to resume your regular mortgage payments and to make up any payments that were forgiven during the relief period—conditions that should be spelled out clearly in a forbearance agreement. If you are unclear on these terms, ask your mortgage servicer for guidance.

There are two types of forbearance: general and mandatory. Interest on your loans continues to accumulate while in forbearance.

That means you won't have to pay back some or all of your loan(s). The terms “forgiveness,” “cancellation,” and “discharge” mean essentially the same thing. Public Service Loan Forgiveness is the most common way people apply to have their student loans forgiven.

At the end of a mortgage forbearance, the borrower is expected to resume payments and repay missed payments.

Loan forbearance can impact your credit depending on how lenders report relief payments to credit bureaus. If payments are reported as delinquent, forbearance may harm your credit. However, many types of forbearance shouldn't hurt your credit.