What to Do if Your Mortgage Forbearance is Due

It’s Fall 2021 which means if you were one of the nearly 6 million Americans granted mortgage forbearance in 2020, as a result of the pandemic, your payment is either due or coming due. 

As such, we wanted to share with you what options you have if you are a homeowner in this situation. Let’s dive in.

What is Mortgage Forbearance? 

In short, mortgage forbearance means that the mortgage company who manages your loan allows you to pause or reduce your payments for a period of time, usually due to a hardship like Covid-19; at the beginning of the pandemic, those who were struggling and needed help with their mortgage were able to apply for forbearance and put that payment off. 

However, forbearance does not erase what you owe the lender, so at the end of the forbearance, which is now for most, homeowners are required to pay back that amount. 

What are My Mortgage Forbearance Payback Options?

There are a few payback options for mortgage forbearance to consider: 

  1. pay back the past due payments in a balloon payment; 
  2. formal, permanent loan modification; or 
  3. sell the home & cash out the remaining equity

Option 1: Make the Balloon Payment

Depending on your lender, you may be required to make a balloon payment for all of your past due payments. Realistically though, most homeowners cannot afford a payment this high, and lenders know this. While some may still require the payment, most will allow you to apply for a long-term loan modification to cover the costs.

If you were fortunate enough to be able to save during the pandemic and are in a position to make the balloon payment, great! If not and you would like to stay in your home, a long-term loan modification may be your best bet.

Option 2: Apply for a Loan Modification

While the application process for a long-term loan modification is a bit tedious, this option is best for homeowners who are strapped for cash but looking to stay in their home long-term. 

Usually, lenders will take homeowners from a 30-year to a 40-year mortgage, or a similar transition depending on your starting point, to cover missed payments while keeping future payments affordable. 

Option 3: Cash Out

With the market still strongly in favor of sellers, you may find it makes the most sense to simply cash out and retain the remaining equity –  especially if your goal isn’t to stay in your home long-term.

We’re Here to Help!

If you are in forbearance and would like to talk about your options, reach out to us at 703-651-5655 or via our website for a free, confidential conversation. We’ve helped hundreds of homeowners in similar situations, to either stay in their home or sell without distressed terms, and are more than happy to help you out. 

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