What Is Mortgage Deferral and How Does It Help Homeowners?
2 minute read • Upsolve is a nonprofit that helps you get out of debt with education and free debt relief tools, like our bankruptcy filing tool. Think TurboTax for bankruptcy. Get free education, customer support, and community. Featured in Forbes 4x and funded by institutions like Harvard University so we'll never ask you for a credit card. Explore our free tool
If you’re experiencing a temporary hardship and need a little breathing room on your mortgage payments, you may be able to get a deferral or you can ask your lender for a late fee waiver. A mortgage payment deferral is designed to help you get back on track so that you can keep making your payments on time.
Written by the Upsolve Team. Legally reviewed by Attorney Andrea Wimmer
Updated August 21, 2024
If you’re behind on your mortgage payments, a mortgage deferral could help you catch up on your home loan. If you qualify, a mortgage deferral lets you put your past-due payments at the end of your loan. Deferrals have their pros and cons and aren’t the best option for everyone. Keep reading to learn more about whether a mortgage deferral is right for you. We’ll also cover other mortgage-relief options.
Mortgage-Relief Options
A job loss, injury, or other emergency can make it hard to keep up with groceries, utilities, and mortgage payments. Mortgage forbearance and mortgage deferrals are two mortgage-relief options that help homeowners who are struggling with their mortgage payments because of temporary difficulties. Each can give you some relief and time to work out long-term solutions.
Mortgage Forbearance
Mortgage forbearance is a deal with a lender to reduce or postpone payments for a certain period of time. While you won’t have to make payments during the forbearance period, interest on the loan will still accrue. Also, during the forbearance period, the lender won’t pursue foreclosure.
A forbearance plan usually lasts for three to six months. You can find some general information on mortgage forbearance from the Consumer Financial Protection Bureau (CFPB).
How Do You Get a Mortgage Forbearance?
If you need a forbearance, you must contact your mortgage servicer and ask for it. You can ask your mortgage servicer how long the forbearance period will last. The contact information for your servicer should be on your mortgage bill. Together you and the servicer will agree on a forbearance plan. You’ll have to look at your personal financial situation and then decide how you to repay the payments that are being postponed.
There are usually four options for repayment after the end of your forbearance:
A lump-sum repayment where you make a one-time lump-sum payment when your forbearance period ends.
A payment plan where your monthly payment increases once your mortgage payments resume.
A loan modification, which means you modify your loan to extend it, get a new interest rate, or both. If you have a VA loan, you can extend your loan up to 30 years, as long as the extension is 10 years or less from the ending date (maturity date) of your loan.
A payment deferral, which allows you to tack on the deferred payments to the end of your loan. You’ll pay this when you sell or refinance your house. Freddie Mac, Fannie Mae, and other federally backed loans allow borrowers to make up the payments at the end of the loan or when the house is sold or refinanced. This does not extend the period of your loan, and you’ll have a chunk of money to pay at the end. You can always ask for a loan modification when the time comes to pay the deferred amount.
Mortgage Deferral
Mortgage forbearance is a proactive measure you take before you get behind on your payments. If you’re already behind, you can ask for a mortgage deferral. Deferrals are good to use if you have a temporary hardship, such as getting laid off for a couple of months, but you know you’ll be able to resume making your mortgage payments after the hardship is over.
Deferrals are better than forbearances for people who know they can’t make a lump-sum payment to pay off their missed payments during a forbearance. A mortgage payment deferral allows you to take those missed payments and put them at the end of your mortgage term to make your loan current.
Upsolve Member Experiences
1,940+ Members Online
Let's Summarize...
A mortgage deferral allows borrowers to move past-due house payments to the end of their loan term. It makes the home loan current immediately without requiring the homeowner to make a lump-sum payment on the past-due amounts. A mortgage deferral can also help homeowners who’ve used forbearance to deal with a temporary hardship. Mortgage forbearances allow homeowners to temporarily stop making payments, though interest keeps occurring. At the end of the forbearance period, there are four ways to make up the past-due amount.
If you’re struggling to make your house payments, contact your mortgage servicer to see what options you have.
