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The Reality Behind Mortgage Forbearance

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Fri, Apr 10, 2020 at 10:05AM

The Reality Behind Mortgage Forbearance

As financial problems continue to arise due to unemployment caused by the coronavirus pandemic, more and more people are filing for mortgage forbearance to seek relief from their monthly payments. Mortgage forbearance effectively puts a hold on your payments due to financial hardship and so many people have already begun leaning on this crutch to survive the COVID-19 crisis – as a matter of fact, requests for forbearance increased by 1896% between March 16th and March 30th! Though the aid this offers is immediate, it puts its applicants at risk of owing all of their missed payments as soon as their mortgage resumes which can be crippling to your credit if you’re not able to afford it. Continue reading to learn more about your options and consider forbearance as a last resort if necessary.

The terms of mortgage forbearance vary by lender and if this is the route you elect to take, please make sure to speak with your loan provider to gain a better understanding of what your mortgage will look like once the forbearance concludes. A lender may either charge you the full lump-sum of your “missed” payments as soon as the forbearance ends or they may also offer you a repayment plan that will spread out your payments when the mortgage resumes. Additionally, lenders may report that payments originally scheduled during a forbearance period came in late which can be devastating to your credit and also make it more difficult to refinance your mortgage, which is an alternative to mortgage forbearance that poses less of a threat to borrowers.

Mortgage refinancing replaces your current home loan with a new one by paying off the remainder of your pre-existing loan and offering you a new mortgage with different terms that are more suitable to the borrower, such as reduced monthly payments or tapping into your home equity. Rather than relying on the temporary relief of a mortgage forbearance, it may be safer to refinance with a new mortgage that offers more manageable monthly payments over a longer period of time. As with any financial decision, it’s crucial to educate yourself entirely before making any important changes. For example, lower monthly payments may be exactly what you need to make it through the COVID-19 pandemic without losing your home or damaging your credit score but it could mean paying out more in interest over the course of your loan.

Refinancing is also a viable way to remove the mandatory payments of private mortgage insurance that may be a part of your original mortgage.  Loaners will typically require borrowers who pay less than 20% of the cost of their home up front to also purchase private mortgage insurance in order to protect the loan provider in case homeowners fail to make their mortgage payments on time. Of course, this also means additional monthly payments for homeowners on top of what they’re already paying for their mortgage. If you have built up enough equity through your original mortgage, you can refinance to a new loan that doesn’t require private mortgage insurance and will cost you less each month.

If you’re looking for a loan provider to refinance your home, Movement Mortgage is an excellent choice and our preferred lender. Boasting low down payments and lightning-fast closing times, Movement Mortgage always puts their clients first and will offer you an affordable payment plan. Every transaction with Movement Mortgage goes smoothly and will be sure to cover all of your mortgaging needs to keep your credit up!


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