Mortgage Forbearance vs Deferment | A Forbearance or a Mortgage Deferment, which one is for you?

A Mortgage Forbearance or a Mortgage Deferment, which one is right for you? During this Covid-19 pandemic, some homeowners might consider a Mortgage Forbearance or a Mortgage Deferment. This video goes over those differences.

Mortgage lenders generally offer a number of options for borrowers facing financial hardship. They're usually available only on a case-by-case basis, and you'll need to provide proof of your hardship as well.

Here are the four main options you might consider if you expect making that payment will be hard:

Forbearance: Forbearance lets you make reduced payments or no payments for a set period of time, though your loan continues to gain interest during this period. The skipped payments are then due at the end of that designated timeline. In some cases, a lender may let you spread those skipped payments out over a few months.

Deferment: Deferment also allows you to skip payments, and sometimes it puts your interest on pause, too. With deferment, your payments may be due once the designated time period ends or they may be tacked onto the end of your loan (basically extending your loan term).
Loan modification: This is a process that allows you to change the terms of your loan. You might be able to extend your loan term or lower your interest rate, thereby reducing your monthly payments, too.

Refinancing: Refinancing your loan into a longer-term loan or one with a lower interest rate can also help in hard times. Just keep in mind there are closing costs associated with this, though you may be able to roll them into the loan balance. Cash-out refinances can also give you a lump-sum payment that you can use to stay afloat if your income has been reduced.

There's always the option to sell your property, too (although this may prove challenging in the current climate). Then, you could move to a lower-cost rental home and use the profits to pay your bills until you get back on your feet. The perk here is that there's no timeline, whereas forbearance and deferment usually only last a few months.

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Ron Block
RE Florida Homes
561 436-4997

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