Mortgage forbearance may sound like a complicated and overwhelming concept, but it can be an essential lifeline for many homeowners who have experienced or are experiencing some form of financial hardship.
For some homeowners, the new year also poses new challenges — and you might be keen to find out more about the latest policies, eligibility requirements and repayment options under mortgage forbearance in 2025. Let’s take a closer look at how mortgage forbearance actually works, whether it’s a good idea for your specific scenario, and some alternatives you can consider as well!
What is a Mortgage Forbearance?
Simply put, mortgage forbearance refers to the process of either temporarily pausing your mortgage repayments or reducing your monthly repayment sum. This process is normally initiated when a homeowner faces financial hardship – or other circumstances, such as natural disasters – that make it difficult for them to make repayments on their mortgage loan.
However, an important thing to note with mortgage forbearance is that the amount the homeowner owes remains the same, and only the payment timeline is modified. In addition, the mortgage forbearance arrangement that you might be able to obtain will vary from one lender to another. For example:
- Some lenders might allow you to pause payments for the period of the forbearance, but require the accrued amount to be repaid in full after forbearance ends
- Other lenders might allow you to reduce your payment amount for the period of the forbearance, with an increased payment amount after the forbearance ends
Does Mortgage Forbearance Affect Your Credit?
Mortgage forbearance can generally have an impact on your credit. However, the effect may vary depending on how it is reported to your lender and how you manage the repayment process.
For example, certain federal or state-approved programs (such as those that were instituted during the Covid-19 pandemic) require lenders to officially grant forbearance and to report your loan as current rather than delinquent. This can mitigate the negative impacts of forbearance on your credit.
On the other hand, however, if you have missed payments before applying for forbearance, your missed payments could still negatively impact your credit score. Similarly, if you fail to meet the terms of repayment after your forbearance ends, your loan may also be reported as delinquent, potentially lowering your credit score as well.
It is also important to note that even though forbearance itself may not lower your credit score, some lenders might have a waiting period before they offer new loans to homeowners who have had mortgage forbearance.
Is Mortgage Forbearance a Good Idea?
While mortgage forbearance can be a good idea for some homeowners, it is definitely not a universal solution. Whether or not you should opt for mortgage forbearance would depend on various factors such as your own financial situation as well as your lender’s policies.
If you find yourself having trouble paying your mortgage, consider talking to your lender and a US Department of Housing and Urban Development (HUD)-certified housing counselor to discuss your options when it comes to forbearance.
How to Apply for Mortgage Forbearance?
The process of applying for mortgage forbearance typically begins with reaching out to your lender as soon as you begin to anticipate financial hardship or difficulties with paying your mortgage. Most major lenders in the U.S. typically have departments that are dedicated to reaching viable arrangements with borrowers who are facing financial hardship.
When you reach out to your lender to begin applying for mortgage forbearance, you should ask about important details about the forbearance including:
- What their eligibility requirements are for mortgage forbearance
- How long the forbearance lasts
- Whether interest on your loan will continue to accrue during the forbearance period
- How the forbearance will affect your credit
- What your repayment options are after the forbearance ends
If you decide to proceed with your application for mortgage forbearance after confirming the details with your lender, you will then need to prepare the necessary documentation. For most lenders, this includes proof of your financial hardship or extenuating circumstances. You will also then need to complete the application by phone, online or via a written request, depending on your lender’s policies.
If your forbearance application is approved, you will typically then receive a formal forbearance agreement that you will need to sign and adhere to.
Alternatives to Mortgage Forbearance
If you find yourself behind on your mortgage payments, there are also various other alternatives to mortgage forbearance that you can consider as well, such as:
- Downsizing: Selling your home to pay off your mortgage and moving to a home with a more affordable rent or mortgage may be a practical solution for you if you are struggling financially. This strategy is known as downsizing and is commonly used by homeowners to reduce their monthly housing costs and free up cash for other necessary expenses.
- Loan Modification or Refinancing: Unlike forbearance which only temporarily changes the structure of your mortgage or pauses your repayments, modifying or refinancing your home loan entirely will enable you to change the terms to make them more manageable. Your options for modifying or refinancing your loan can include extending the loan term or adding missed payments to the loan balance and may be a better option than forbearance for homeowners who are facing longer term financial difficulty.
- Government Assistance Programs: Federal and state governments typically also offer assistance programs to homeowners who are facing difficulty in repaying their mortgages. To find out if you qualify for such a program, you can consider speaking to a HUD-certified housing counselor.
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