Circumstances that make life hard can impact your finances. You may suffer a prolonged illness, a severe injury, damage to your property due to a storm, or the loss of a job. These situations may hamper you from making your mortgage payments. To prevent your bank foreclosing on you, you might approach your bank to request forbearance.
You probably have a general idea of how forbearance works. Your mortgage lender agrees to pause your mortgage payments or let you pay lower amounts on a temporary basis. But as the Consumer Financial Protection Bureau explains, forbearance can take many different forms depending on the circumstances.
Factors that influence forbearance
You can expect your lender to consider different factors when coming up with a forbearance agreement, like the type of loan you have and the requirements of your loan agreement. Such factors will influence how your lender will require you to pay your missed or delayed mortgage payments in full once the forbearance period is over.
Examples of forbearance
You might secure an agreement from your lender to reduce your payments by a set amount for a number of months. Afterwards, you will have another period to pay back the reduced amounts. Some lenders require their clients to pause all payments for a few months before having to pay off the complete delayed amount in a single month.
Still, the prospect of paying off so much in a lump sum might not work for you even if you get your finances back in order by then. Some lenders allow their clients to extend their mortgage term to pay off the delayed amounts. Another option is to take out a separate loan to extend the mortgage, but this may result in a large payment at the end of the mortgage because the second loan will come due.
Flexibility in forbearance
These different scenarios show that lenders can customize forbearance according to the circumstances of the client. This may give you hope that you can secure a forbearance arrangement that works for you. Even if forbearance does not prove viable for you, there are other options that you may explore to stave off foreclosure.