What to do when your mortgage forbearance expires, whether you’re back to work or still struggling financially.

If you’re one of the millions of Americans who received mortgage relief in 2020, your forbearance period may soon end. Here’s what you need to know going forward whether you’ve regained a paycheck or continue to struggle with limited or no income.

If you’re back on your feet financially

If your income has been restored and you no longer need a reprieve from mortgage payments, congrats! Getting back on your feet financially is a huge accomplishment. As your forbearance term ends, re-read the terms of your agreement; your next step depends on the terms of your original agreement.

Whether forbearance allowed a reduction or suspension of monthly payments, you’ll have to resume making full payments.

You may be required to make full monthly payments plus an additional amount to make up for the payments missed during forbearance. Or your agreement might call for paying back the deferred loan in a lump sum. Make sure you know what’s expected.

In some cases, if you qualify, missed payments may be added to the back end of the loan with no change in the amount of monthly payment, term or maturity date. The remainder owed will turn into a balloon payment at the end.

If you’re unsure what your forbearance plan requires at expiration, call your lender and have them explain the next steps.

If you’re unable to resume payments

If you’re nearing the end of forbearance and your income hasn’t been restored, don’t despair—you have options.

The first option is to request an extension of forbearance if you expect your income will be restored within the next six months. Extensions aren’t automatic—you must request one. Borrowers can often get one extension of six months. Talk to your lender about an extension before your current forbearance runs out. The sooner the better, as most mortgage teams are exceptionally busy due to COVID-19 and a high volume of home loans because of low mortgage interest rates. Please note: 12 months is typically the maximum you can be in forbearance.

A lower monthly payment may be possible two ways. One is through a loan modification agreed to by your lender. The second is refinancing the mortgage at a lower interest rate than you currently pay, though three on-time payments since exiting forbearance is a requirement of this longer process.

If you’re struggling financially, look at your budget and see if expenses can be cut in order to make mortgage payments. Also consider taking on an additional job to bring in more money.

In some cases, the best option might be to sell a home you can no longer afford. If you find yourself in this situation, see if the deferred loan amount can be paid upon the sale of the home.

Also, selling your home before a lender starts foreclosure proceedings can help protect your credit score. Federal laws designed to protect homeowners state that loan servicers can’t start foreclosure proceedings until the mortgage account is over 120 days delinquent. That gives you four months to sell, pay off the mortgage in full, and find a less expensive place to buy or rent without doing major damage to your credit.

We’re here to help

If you have questions about mortgage forbearance, we’re here to help; call us at 800-991-2221.

Consumers helps more than 2,000 members finance land, first and second homes, and home improvement projects each year. We’d love to help you with a mortgage or home equity line of credit; contact us online or call us at 800-991-2221.