Forbearance Facts that could save you from trouble later...
3 things to consider about forbearance, before you take action:
- A forbearance agreement is actually a form of loan default, based on a temporary hardship that allows you to make a reduced payment (or no payment at all) during the terms of the forbearance. Although according to the CARES Act a servicer may not require proof of hardship, this program is not designed for you to take if you are able to make your payments.
- While the forbearance won't affect your credit score, it will still be on your credit profile. This means it could be the reason you are denied a mortgage in the future, whether a purchase or a refinance of your current mortgage, or only be offered a higher rate.
- Your payments are not just tacked on to the end. While this is a possible scenario, this deferment is not the usual process. Instead, it is more likely your missed payments will be due at the end of the forbearance period, in either a lump sum or possibly spread out over a longer timeframe (such as a year).
Did you know that a forbearance alternative may be to refinance and stash some extra money in the bank? If you'd like to know more about your options, please contact me anytime and we can talk about it.
