What Happens When Mortgage Forbearance Ends?

By Eric Jurmo

From Saving Homes to Selling Them. As a Detroit Firefighter, Eric Jurmo spent many years saving homes and lives. Injured in the line of duty, he had to find a new profession. What he found was a new passion: Real Estate.

If your mortgage forbearance is ending, you might be wondering: What happens next? Forbearance is a helpful lifeline for many homeowners because it allows them to temporarily pause or reduce their mortgage payments during tough times. However, forbearance doesn’t mean your payments have already been made. In fact, your missed payments must be repaid! Let’s break down how forbearance works and what your options are moving forward.

What is mortgage forbearance? Simply put, forbearance is when your mortgage lender allows you to temporarily pause or reduce your payments instead of forcing you into foreclosure. It’s a short-term solution for homeowners facing financial hardship to give them time to get back on their feet.

But here’s the catch: Forbearance doesn’t mean your payments are already settled. Those months of skipped or reduced payments accumulate along with interest rates. They must be paid back when your forbearance period ends.

What happens when forbearance ends? Homeowners are often surprised after forbearance when they discover they owe a large lump sum that covers all missed payments and interest. If you’re not prepared for that, it can put you in a tough financial spot. So, what can you do? You have a few options:

• Payment deferral: Your missed payments are moved to the end of the loan. This can provide temporary relief, but it also increases your mortgage balance.
  
• Loan modification: Your lender may adjust the terms of your loan to include the missed payments, potentially raising your monthly payment.
  
• Refinancing: If your financial situation has improved, you might be able to refinance into a new loan with better terms.

Before making a decision, you need to take a close look at your current income and expenses to know if you can realistically resume your payments. And whatever you do, don’t wait! Contact your mortgage company as soon as possible to discuss your options. The longer you wait, the fewer choices you may have.

What if you can’t afford your mortgage payments? If resuming payments isn’t an option, you still have alternatives. Here are three ways to handle this:

• Sell your home: If you have equity in your home, selling might be your best move. You can use the proceeds to pay off your loan and find a more affordable place.
  
• Short sale: If you owe more than your home is worth, a short sale allows you to sell the property for less than what’s owed, with the lender’s approval. It’s not an easy process, but it’s better than foreclosure in the long run.
  
• Deed in lieu of foreclosure: As a last resort, you can give your home back to the lender. This avoids foreclosure but still impacts your credit.

Foreclosure should always be the last option. Not only does it severely damage your credit, but it can also prevent you from buying another home for up to seven years.

How fast can foreclosure happen? Most people don’t realize how quickly the foreclosure process can start. After just 70 days of missed payments, your lender can begin filing for foreclosure. Once that happens, legal fees, interest, and other costs pile up fast, making it even harder to get back on track.

If you’ve received a foreclosure notice, take action immediately. The sooner you start working on a solution, the more options you can explore.

I know this isn’t easy, but there are solutions and I’m here to guide you through them. If you have questions or need guidance, just call me at 586-713-8524 or send an email to eric@soldbyericteam.com. Let’s figure out the best solution for your situation and get you back on stable ground.