What Is Forbearance and How Can It Affect You as a Homeowner?

Are you thinking about asking for mortgage forbearance? During the COVID-19 global pandemic, a lot of people have chosen to temporarily stop paying their mortgage due to economic uncertainty, job loss, and other unique circumstances. 

If you are experiencing financial hardship, keep reading, and learn about the basics of forbearance and how it can affect you as a homeowner. 

What is Forbearance?

Forbearance is a financial agreement between you and your mortgage lender to temporarily reduce or completely suspend your monthly mortgage payments for a period of time. Typically, it’s requested when you’re experiencing a situation that impacts your ability to pay, e.g, job loss, or major illness.

Keep in mind that forbearance is not a waive or grant. Once the period agreement is over, you have the responsibility to pay those missed payments. 

How Does It Work?

First, you need to contact your mortgage company and let them know about your situation. When this happens, make sure to have all your basic financial and loan information on hand. Then, you’ll detail explain your hardship and tell them if it’s a short-term or long-term issue. 

Once, they’ve all the information needed and depending on your type of mortgage, they’ll determine a solution for you. And if you qualify, they’ll set up an appointment to sign the agreement terms:

  • Forbearance Period
  • Reduce Payment Amount (or suspended)
  • Terms of Repayment

Also, even if the payment is suspended, the loan still automatically accrues interest during the forbearance’s period, and you’ll continue to receive monthly statements. 

Forbearance Period

Typically, forbearance agreements are for 90 days initially. Then, depending on the circumstances, it may be granted for up to 180 days or even a year. This depends on your mortgage lender and any qualifications they might have. 

What Does it Mean For Me?

Forbearance, like everything in life, has advantages and disadvantages. Here’s a quick guide you should read before deciding to sign an agreement and avoid penalties. 


The main benefit of forbearance is that you are given the option and time to improve your situation and focus on getting better. Once you’re back on your feet, you’ll be able to assume your financial responsibilities without a problem.

Also, you still own your house, and you’ll avoid foreclosure, which involves even greater damage to your credit score than forbearance.

Your Credit

It is important that you know that forbearance should be your last resource. As long as you made the mortgage payments according to the agreed period, your credit score will not be negatively impacted. 

However, your mortgage lender can report your forbearance agreement to the credit bureaus, and then, it’ll be recorded in your credit history. Therefore, to become eligible for a new loan, you must re-establish yourself as a credible owner.

When Forbearance Ends 

Typically, when the forbearance period ends, you’ll have three options:

  • First, if your situation has improved, you can be required to pay the full amount owed; this is called reinstatement. 
  • Second, if you don’t have the required financial capability, you’ll need to establish a repayment plan with your lender, according to the terms you signed before. In this case, the missed payments will be divided into your regular monthly payment by adding a set amount. 
  • And, third, you can add the repayment amount to the end of the mortgage. 

In the case that you cannot meet the obligations of the repayment plan, you’ll have the option to apply for a loan modification to ease the financial burden. We know that this isn’t the ideal arrangement but it’s better than losing your home. 

Avoid Foreclosure and Sell Now

Foreclosure is a legal process where your lender obtains ownership of your home. This happens when you don’t make your mortgage payments or violate any of their agreements.  Sometimes, you can avoid it, but you must do something as soon as you’re informed.

If you don’t see an answer to your financial situation, we can provide you with a fast and efficient resolution. Contact Colorado Cash for Keys and sell your home in as little as a week, with no extra cost to you.