I know that during this time there are many that are exploring different relief options as this pandemic is having some detrimental financial affects. I wanted to write this memo so that you are aware of the difference between a forbearance and a deferment on your mortgage. Many people are calling their servicers to get assistance and I believe it’s important to get an understanding of what they are currently offering.
A forbearance agreement is an agreement that an owner of a property with a mortgage is making with the lender that is servicing their loan to agree to accept money down the road rather than get payments now. So for example if your monthly payment is $3,000 the bank could give you a 90 day forbearance. Meaning you don’t need to make your May, June and July payment. However the big caveat is in August you would have to pay all the missed payments at once plus your August payment. That would be $12,000 due in August. As of now there is no clarity on how the banks are going to proceed if you cannot make all the payments at once. The banks are not clear if you will be able to refinance or negotiate the payment at the end of the forbearance.
In contrast a deferment pushes your payments out to when the note is due. So for example if you have a 30 year note and your bank offers a 90 day deferment this pushes your note to 30 years plus 3 months.
Both programs should not negatively impact your credit but it’s important that you clarify that with you bank and get the agreement in writing. Also it is important to note that just because you make a payment to Bank of America for example that does not mean they own that note. They could just be servicing that note for another investor that is offering different options that are not noted here. Make sure to ask who owns your note so that you are more informed.
I have included a link below from the Consumer Financial Protection Bureau with some helpful information and you can always contact me should you have any questions. Stay safe!