What to do when your mortgage forbearance period ends

Mortgage forbearance gives borrowers experiencing financial hardship a temporary break from making payments. If you’re considering asking for forbearance — or nearing your mortgage forbearance end date — it’s important to know your options when payments kick back in.

When does mortgage forbearance end?

An initial mortgage forbearance period can last from three to six months — more likely six, now that the pandemic protections have expired. Beyond that, you’ll need to ask your lender for a forbearance extension. Most loans can go into forbearance for up to 12 months, some even longer.

What to do when mortgage forbearance ends

If you’ve reached your mortgage forbearance end date, you can request an extension, make a payment, modify your loan or sell your home. Here’s what those options look like:

Request a forbearance extension

If you are still struggling financially when the first forbearance period ends, here’s what you can do:

1. Call your lender or servicer. You might qualify for a forbearance extension but must ask for it. If you don’t communicate with your lender and are taken out of forbearance but fail to make payments, you’ll harm your credit score and potentially lose your home.
2. If your lender cannot offer you a forbearance extension, ask it how you can work with it to avoid defaulting on your mortgage.

Make a deferred payment

Ask your servicer if you can defer any missed payments until you sell your home or refinance your mortgage. By doing so, you will simply pay off what you owe when the mortgage ends.

Make a payment

Most mortgage borrowers aim to weather the storm of financial difficulties and stay in their homes. In such cases, there are many options for addressing short-term cash issues and figuring out how to stay in place.

Keep in mind that forbearance is not loan forgiveness but a form of temporary relief to help you remain in your home. You’ll eventually need to repay the skipped payments. 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

Modify your loan

Depending on your lender, you might be eligible for a loan modification. This involves permanently changing your mortgage terms, like the repayment period, interest rate or principal balance, to make the monthly mortgage payments more affordable. If the lender agrees to modify your loan once your forbearance ends, you’ll have to resume payments.

To request a loan modification, you’ll need to:

1. Gather financial documentation to plead your case to your lender, including proof of financial hardship. Be mindful that a loan modification is sometimes only offered to borrowers who can demonstrate that the current payment is unaffordable.
2. Contact your lender or servicer and ask for a loan modification. They’ll have you fill out and submit an application.
3. If you are denied, you might be able to request an appeal.

Sell your home

If you’re open to relocating, selling your home could be a way to avoid foreclosure.

“A lot of these borrowers have equity in their homes, so they can sell their current houses and use that equity to help pay off their existing mortgage and possibly fund a down payment on a cheaper house or at least put some money into savings after the sale,” says Marina Walsh, vice president of Industry Analysis at the Mortgage Bankers Association.

“Another option if they don’t want to proceed with the foreclosure route and they’re willing to move, there are programs like Cash for Keys, in which the lender assumes the title of the home, but might provide the borrower with some relocation assistance to help them settle in a new, more affordable housing situation,” says Walsh, adding that a borrower and their lender might also consider a short sale. That’s when you sell your home, and even if the proceeds are not enough to pay off the full mortgage, the difference is essentially forgiven.

Options after mortgage forbearance

Another possibility: Refinance your loan to a new one with a lower, more manageable payment. This isn’t always feasible, however, especially because you were struggling financially to begin with. However, you might be able to get a low-cost refinance to help cut costs. You will need to have at least a 620 credit score and enough equity in your home, usually 20 percent, to qualify for a refinance.

In addition, you typically cannot apply for a refinance immediately after coming out of forbearance. Many lenders require what is known as a “waiting period” after forbearance before they will approve a refinance. The length of the waiting period varies by your loan type and lender, so be sure to reach out to your lender about its requirements for refinancing after forbearance.

For those who have an FHA loan, there are other options to consider once the forbearance period ends. For instance, you may be able to qualify for the Advance Loan Modification program. Through this program, homeowners can receive a permanent change to some mortgage terms, including reducing their monthly principal and interest payments by at least 25 percent.

FHA loans are also eligible for a Standalone Partial Claim. This approach is designed for homeowners who can resume payments, but cannot repay the missed payments. The owed mortgage payments are rolled into a zero-interest second lien on the home that you do not need to repay until you make your last mortgage payment. In addition, if you sell the property or refinance, you must repay the second lien at that time.

Frequently asked questions on ending mortgage forbearance

• Can you buy a new house after mortgage forbearance?

  Yes. If you don’t think you’ll be able to afford your current mortgage payment in the long term, one option is to sell your home and buy a newer, less expensive house.
  

• Can mortgage forbearance be forgiven?

  No. Your lender will hold you responsible for making up all payments you missed during forbearance, so mortgage forbearance cannot be forgiven.