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    COVID-19 Updates :: Mortgage Forbearance vs Mortgage Deferment

    With so many people out of work due to the stay at home order in New Orleans, folks are getting a little nervous about having the ability to continue making their mortgage payments. You’ve likely heard the terms forbearance and deferment tossed around, but may not know the difference between the two.

    What is a mortgage forbearance?

    According to the Consumer Financial Protection Bureau

    Forbearance is when your mortgage servicer, that’s the company that sends your mortgage statement and manages your loan, or lender allows you to pause or reduce your payments for a limited period of time.

    Forbearance does not erase what you owe. You’ll have to repay any missed or reduced payments in the future. So, if you’re able to keep up with your payments, keep making them. The types of forbearance available vary by loan type.

    In our opinion, forbearance is not the best option available. Depending on your individual lender, you may owe all of the missed payments at the end of the forbearance period. If that’s the case, and you don’t have the money to pay them, the end of the forbearance period could also be the beginning of the foreclosure process.

    What is a mortgage deferment?

    With a deferment, you can skip payments and have them tacked on to the end of your loan. For example, if you still have 15 years to pay your mortgage and you receive a 6 month deferment, you’ll be paying for the next 15 years and 6 months. Interest may or may not continue to accrue, depending on your mortgage lender.

    Are there any other alternatives?

    Refinancing may be an option that gives you some choices if rates are lower than you’re currently paying. You could refinance into a longer-term mortgage that would reduce your monthly payment amount. Or even take some of the equity out of your home and use it to get through a challenging time. Be sure you talk to your financial advisor about these options.

    If none of these options are viable, there’s always the choice to sell your home, if necessary. We never hope that’s necessary, but if it is, please reach out to us and we’re happy to assist in any way possible.

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