[Mortgage Forbearance](/blog/what-happens-when-you-miss-mortgage-payment): How It Works and What Happens After

When financial hardship strikes—whether from job loss, medical emergency, natural disaster, or other crisis—mortgage forbearance can provide crucial breathing room. But while forbearance offers temporary relief, understanding exactly how it works and what happens when it ends is essential to making the right decision for your situation.

What Is Mortgage Forbearance?

Mortgage forbearance is a temporary agreement between you and your lender that allows you to pause or reduce your monthly mortgage payments for a specific period. During forbearance, your lender agrees not to initiate foreclosure proceedings, giving you time to recover from financial hardship.

Important: Forbearance is not loan forgiveness. You still owe the money—you're just postponing payment.

How Mortgage Forbearance Works

The Basic Process

1. Contact your lender: As soon as you know you'll have trouble making payments, reach out to your loan servicer.

2. Explain your hardship: Document why you can't make payments (job loss, medical bills, disaster, etc.).

3. Request forbearance: Ask specifically for a forbearance agreement.

4. Receive forbearance terms: Your lender will explain the length of forbearance, payment requirements (if any), and repayment options.

5. Get it in writing: Always get the forbearance agreement documented in writing before you stop making full payments.

6. During forbearance: Make reduced payments or no payments as agreed.

7. End of forbearance: Work with your lender to resume payments through one of several repayment options.

Typical Forbearance Terms

• Duration: Usually 3-12 months, sometimes extendable
• Payment reduction: 0% to 100% (complete pause or partial payment)
• Interest: Continues to accrue on your unpaid balance
• Late fees: Typically waived during forbearance
• Credit reporting: Depends on the program and situation (more below)

Types of Forbearance

Disaster Forbearance

Following natural disasters (hurricanes, wildfires, floods, earthquakes), lenders often offer automatic forbearance to affected homeowners.

Special features:

• Often easier to qualify for
• May not require extensive documentation
• Sometimes offered proactively by lenders
• Can typically be extended if needed

COVID-19 Forbearance (Historical Note)

During the COVID-19 pandemic, special forbearance programs were created for government-backed loans (FHA, VA, USDA, Fannie Mae, Freddie Mac):

Key features:

• Up to 18 months total forbearance
• No documentation required
• No late fees
• No negative credit reporting (if your account was current before forbearance)

While the specific COVID program has ended, it established precedents that influence current forbearance policies.

General Financial Hardship Forbearance

For non-disaster hardships (job loss, illness, divorce, etc.), you can request forbearance, but terms vary significantly by:

• Loan type (FHA, VA, conventional, etc.)
• Lender policies
• Your specific situation
• Your payment history

Short-Term Forbearance

Some lenders offer brief forbearance (1-3 months) for temporary issues like:

• Delayed paychecks
• Short-term disability
• Major car repairs affecting budget
• Temporary job changes

Qualifying for Forbearance

Documentation Requirements

While requirements vary, be prepared to provide:

• Proof of hardship: Job loss letter, medical bills, disaster declaration, etc.
• Financial information: Income, expenses, bank statements
• Hardship letter: Written explanation of your situation
• Contact information: Current phone and email

Some programs (like COVID forbearance) required no documentation; others require extensive proof.

Who Is Eligible?

Forbearance is typically available for:

• Homeowners experiencing genuine financial hardship
• Those with government-backed loans (FHA, VA, USDA) often have explicit forbearance rights
• Conventional loans backed by Fannie Mae or Freddie Mac
• Private loans (at lender's discretion)

Who May Not Qualify?

Forbearance might be denied if:

• You can't document legitimate hardship
• You're already in foreclosure
• You've defaulted on a previous forbearance agreement
• Your lender determines you can afford payments

Impact on Your Credit Score

How It's Reported

Credit reporting during forbearance depends on several factors:

If your account was current when forbearance began:

• Many programs (especially government-backed) report as "current" during forbearance
• Some report as "forbearance" or "affected by natural disaster" (neutral notation)
• Should not report as late or delinquent

If your account was already delinquent:

• Forbearance doesn't erase previous late payments
• May continue to show delinquencies from before forbearance
• Forbearance should prevent additional negative marks

After forbearance ends:

• If you successfully resume payments, should report as current
• Previous late payments from before forbearance remain on your report

Protecting Your Credit

To minimize credit impact:

1. Request forbearance BEFORE missing payments if possible
2. Get written confirmation of forbearance terms and credit reporting policy
3. Monitor your credit report during and after forbearance
4. Dispute errors if you're reported as late during an approved forbearance
5. Resume payments on time once forbearance ends

What Happens to Missed Payments

The money you don't pay during forbearance doesn't disappear. Here's what happens:

Interest Continues to Accrue

Your loan balance continues to grow because interest compounds on unpaid principal and accrued interest.

Example:

• Mortgage balance: $250,000
• Interest rate: 6%
• Monthly payment: $1,500 ([principal and interest](/blog/amortization-schedule-guide))
• Forbearance: 6 months (no payments)

Interest accrued during forbearance:

• Month 1: ~$1,250
• Month 2: ~$1,256
• Month 3: ~$1,263
• Month 4: ~$1,269
• Month 5: ~$1,276
• Month 6: ~$1,282
• Total: ~$7,596

Your new principal balance: ~$257,596

Repayment Is Required

You must eventually repay missed payments through one of several options (detailed below).

Forbearance Repayment Options

When your forbearance ends, you'll need to work with your lender to choose a repayment plan. Here are the common options:

1. Reinstatement (Full Repayment)

What it is: Pay the entire missed amount (payments plus accrued interest) in one lump sum.

Example: If you missed 6 months of $1,500 payments plus $600 in additional interest, you'd owe $9,600 immediately.

Best for:

• Borrowers who received a windfall (settlement, inheritance, bonus)
• Those whose hardship was very brief
• Homeowners planning to sell soon

Drawback: Most people can't afford to pay months of missed payments all at once.

2. Repayment Plan

What it is: Add a portion of the missed payments to your regular monthly payment over a set period (typically 6-12 months).

Example:

• Regular payment: $1,500
• Missed amount: $9,000
• Repayment period: 12 months
• New payment: $1,500 + $750 = $2,250/month for one year

Best for:

• Borrowers who have recovered financially and can afford higher payments temporarily
• Short forbearance periods with smaller amounts owed

Drawback: Higher payments can be difficult, especially if you're still recovering financially.

3. Loan Modification

What it is: Permanently change your loan terms to make payments more affordable. This can include:

• Extending the loan term (e.g., 30 years to 40 years)
• Reducing the interest rate
• Changing from adjustable to fixed rate
• Adding missed payments to the principal balance

Example:

• Original loan: $250,000 at 6% for 30 years = $1,500/month
• After forbearance: $257,596 owed, recast over 35 years at 5.5% = $1,458/month

Best for:

• Borrowers with permanent income reduction
• Those who can't afford higher payments
• Long-term homeowners committed to staying

Drawback: May extend your loan term or change other terms; requires qualification and approval.

4. Deferment (Partial Claim)

What it is: Move the missed payments to the end of your loan as a separate, interest-free balance due when you sell, refinance, or pay off your mortgage.

Example:

• Continue regular $1,500 monthly payment
• $9,000 in missed payments deferred
• When you pay off or sell your home in the future, you owe the extra $9,000

Best for:

• Most borrowers who can resume regular payments
• Those who can't afford increased payments
• Homeowners planning to stay long-term

Advantage: No immediate cash needed; regular payment doesn't change; no interest on deferred amount.

FHA, VA, and some conventional loans: Often the default option and usually the best choice for most borrowers.

5. Payment Deferral with Lump Sum at End of Forbearance

What it is: Resume regular monthly payments immediately; pay the missed amount later (often 3-12 months after forbearance ends).

Example:

• Resume $1,500 monthly payment immediately
• Pay $9,000 lump sum in 6 months

Best for:

• Borrowers expecting a windfall (tax refund, bonus, settlement)
• Those who need time to save up the missed amount

6. Refinance

What it is: Get a new loan with new terms, paying off the old loan plus any missed payments and fees.

Best for:

• Borrowers whose credit and income qualify for refinancing
• When current rates are significantly lower than your existing rate
• Those wanting to restart with a clean slate

Drawback: Requires qualification, costs money (closing costs), and may be difficult if forbearance harmed your credit.

Strategic Considerations

Before Requesting Forbearance

Ask yourself:

1. Is this truly a temporary hardship? Forbearance works best for short-term crises.
2. Have I explored other options? Loan modification, refinancing, or selling might be better long-term solutions.
3. Can I afford to repay later? Consider how you'll handle repayment when forbearance ends.
4. What's my loan type? Government-backed loans offer stronger forbearance protections.

During Forbearance

• Save money if possible: Bank what you would have paid toward your mortgage for future repayment.
• Stay in contact with your lender: Don't go silent; maintain communication.
• Prepare for repayment: Plan which repayment option you'll choose.
• Monitor your credit: Ensure you're being reported correctly.
• Get financial counseling: HUD-approved housing counselors can help for free.

When Forbearance Ends

• Contact your lender 30 days before forbearance ends to discuss options.
• Don't assume you need to pay everything back immediately: Deferment is often available.
• Get the repayment plan in writing before agreeing to anything.
• Choose the most sustainable option: Pick a repayment plan you can realistically afford long-term.

Alternatives to Forbearance

Before requesting forbearance, consider:

Loan Modification

If your hardship is permanent (long-term disability, major income loss), modification might be better than temporary forbearance.

Refinancing

If rates are lower or you need better terms, refinancing might solve your problem permanently.

Selling Your Home

If you can't afford the home long-term, selling while you have equity might be smarter than forbearance followed by foreclosure.

Renting Out Part of Your Home

Taking in a roommate or renting a basement suite could generate income to cover mortgage payments.

Partial Payment Arrangement

Some lenders allow temporary reduced payments without formal forbearance.

Accessing Emergency Savings or [Home Equity](/blog/equity-vs-appreciation)

If you have savings or a HELOC, using those might avoid forbearance complications.

Government Assistance Programs

Depending on your situation, state or federal programs might help:

• Unemployment benefits
• Disaster assistance
• Homeowner assistance funds
• Utility assistance (to free up money for mortgage)

Common Forbearance Mistakes

Mistake 1: Assuming Forbearance Means Forgiveness

Forbearance is not forgiveness. You still owe all missed payments.

Mistake 2: Stopping Payments Without Approval

Never stop paying without a written forbearance agreement. You'll be considered delinquent and face late fees, credit damage, and potential foreclosure.

Mistake 3: Ignoring Your Lender

Lenders want to work with you, but only if you communicate. Going silent can result in foreclosure.

Mistake 4: Not Planning for Repayment

Assuming you'll "figure it out later" can lead to default when forbearance ends.

Mistake 5: Choosing the Wrong Repayment Option

Agreeing to a repayment plan you can't afford sets you up for failure. Be realistic.

Mistake 6: Not Getting It in Writing

Verbal agreements aren't enough. Always get forbearance terms and repayment agreements in writing.

Forbearance by Loan Type

FHA Loans

• Forbearance: Up to 12 months, often extendable
• Repayment: Partial claim (deferment) is standard option, interest-free
• Special features: Strong borrower protections; partial claim up to 30% of unpaid principal

VA Loans

• Forbearance: Available based on hardship
• Repayment: Repayment plan, loan modification, or compromise sale
• Special features: VA may assist with negotiations; strong veteran protections

USDA Loans

• Forbearance: Available with documented hardship
• Repayment: Loan modification, moratorium (payment deferral), or special servicing options
• Special features: USDA has special loss mitigation programs

Conventional Loans (Fannie Mae/Freddie Mac)

• Forbearance: Up to 12 months
• Repayment: Deferment, repayment plan, or modification
• Special features: Flexible repayment options; payment deferral often available

Private/[Portfolio Loans](/blog/portfolio-lending-guide)

• Forbearance: At lender's discretion
• Repayment: Varies widely by lender
• Special features: Fewer regulatory protections; negotiate carefully

Life After Forbearance

Rebuilding Your Finances

Once forbearance ends and you've established a repayment plan:

1. Build emergency savings: Aim for 3-6 months of expenses to avoid future forbearance.
2. Create a budget: Track spending to ensure you can consistently afford payments.
3. Increase income: Consider side jobs, raises, or career changes if needed.
4. Reduce expenses: Cut unnecessary costs to create breathing room.

Monitoring Your Credit

• Check your credit report 30 and 60 days after forbearance ends
• Dispute any errors with credit bureaus
• Make on-time payments to rebuild your payment history

Avoiding Future Hardship

• Automate savings: Pay yourself first to build emergency funds
• Maintain adequate insurance: Health, disability, and job loss insurance can prevent hardship
• Diversify income: Multiple income streams provide stability

Frequently Asked Questions

Does forbearance hurt your credit score?

Not necessarily. If your account was current when forbearance began and you entered an approved forbearance program, it should not be reported as a negative mark. However, if you were already delinquent or if you entered forbearance without lender approval, it could hurt your score. Always get forbearance approved and in writing before reducing or stopping payments.

Can you sell your home while in forbearance?

Yes, you can sell your home during forbearance. You'll need to pay off the full loan balance, including any missed payments and accrued interest, from the sale proceeds at closing.

How long can you be in mortgage forbearance?

It depends on your loan type and lender. Typical forbearance periods are 3-12 months, with some programs allowing extensions. During COVID, forbearance could extend up to 18 months for government-backed loans. Check with your lender for your specific situation.

Can you refinance during or after forbearance?

During forbearance, refinancing is difficult because most lenders won't refinance a loan that's not current. After forbearance, you can refinance once you've successfully resumed payments (usually after 3-12 months of on-time payments). Requirements vary by lender and loan type.

What happens if you can't resume payments after forbearance?

If you can't afford to resume payments, contact your lender immediately to discuss options like loan modification, short sale, or deed in lieu of foreclosure. Don't simply stop paying without communication, as this can lead to foreclosure.

Is mortgage forbearance the same as deferment?

No. Forbearance is the temporary pause or reduction in payments. Deferment is one repayment option where missed payments are moved to the end of your loan. Confusingly, some people use these terms interchangeably, so always clarify what's meant.

Do you have to pay back forbearance in a lump sum?

No, not usually. While lump sum repayment is one option, most borrowers use deferment (adding missed payments to the end of the loan) or a repayment plan (spreading the amount over several months). Ask your lender about all available repayment options.

Can you request forbearance more than once?

Policies vary by lender and loan type. Some allow multiple forbearance periods for separate hardships, while others have lifetime limits. During COVID, extensions were common. Check with your lender about their specific policies.

Does forbearance affect your ability to get another mortgage?

It can. Future lenders will see forbearance on your credit report or loan history. However, if you successfully completed forbearance, resumed payments, and maintained good payment history afterward, the impact diminishes over time. Most lenders want to see 12+ months of on-time payments after forbearance.

Can your lender deny forbearance?

For government-backed loans during specific programs (like COVID forbearance), lenders generally cannot deny forbearance if you attest to hardship. For conventional and private loans, lenders have more discretion and may deny forbearance if you don't meet their criteria or can't document hardship.

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