How to prepare for the end of mortgage payment forbearance

In February, the Biden Administration extended the CARES Act federal moratorium on home foreclosures and mortgage forbearance plans. These programs provide much-needed mortgage relief for the 10 million borrowers impacted by COVID-19 who are experiencing financial hardship. 

But for many borrowers, the one-year end date is quickly approaching, and both federal moratoriums will expire on June 30, 2021. If you’ve been relying on a forbearance program to get by financially, how can you get ready to pay your mortgage again? And what should you do once payment relief ends?

One option all borrowers can consider is to refinance their mortgages at a lower rate. When you visit a lending marketplace like Credible, you’ll receive prequalified rates without hurting your credit score. Let’s look at a few other options you can consider.

CORONAVIRUS MORTGAGE RELIEF OPTIONS YOU SHOULD CONSIDER IF MONEY'S TIGHT

What happens when mortgage forbearance ends? 

The end date on your mortgage forbearance depends on when you first requested it. For most borrowers, the mortgage forbearance length is six months, and then you can request a six-month extension.

That means if you requested forbearance at the beginning of the pandemic, your mortgage forbearance has either ended or is getting ready to end. So you need to have a plan in place for how you’ll resume your monthly mortgage payments once it’s over. 

And once forbearance ends, you will not only have to resume making your regular mortgage payments, but you’ll need to pay back the payments you missed. If you’re reaching the end of mortgage forbearance, there are a few different options you can take:

• Request an extension: If your lender agrees to it, you can request an extension on your current forbearance. This should be used as a last resort, and you may need to provide proof that you're experiencing financial hardship. For instance, if you’re unemployed due to the COVID-19 pandemic, your lender may agree to extend your initial forbearance.
• Arrange intermittent payments: Resuming your regular mortgage payments and repaying your missed payments can feel like a huge financial hurdle to overcome. But your best course of action is to contact your mortgage lender to see what kind of repayment plans they offer. One option is to set up intermittent payments — this will allow you to pay back your missed payments over a period of time that works for you.
• Request a loan deferral: If you can afford to begin making mortgage payments again but repaying the missed payments is too much of a financial burden, you might request a loan deferral. This allows you to repay the missed payments in a lump sum once your home is sold or refinanced.
• Refinance your mortgage: Finally, you might consider refinancing your home. When you refinance, you replace your current mortgage with a new loan at a lower interest rate. And if you opt for a longer mortgage term, you could lower your monthly payments even more. You can compare refinancing rates across multiple mortgage companies by visiting Credible to compare rates and lenders.

THINKING ABOUT GETTING A REVERSE MORTGAGE? CONSIDER THESE FACTORS

What should you do to prepare?

Here are a few ways you can begin preparing for the end of mortgage payment forbearance:

• Determine whether you can resume making payments: The first step you should take is to determine what you’re able to do financially after forbearance ends. Can you afford to pay your mortgage, or do you need to request an extension? Understanding where you’re at financially will help you figure out your next steps.
• Contact your lender early: If you do need to request an extension, intermittent payments, or payment deferral, you should contact your lender as soon as possible. Mortgage lenders are receiving a lot of loan modification requests, so you want to allow plenty of time to get the process completed.
• Consider refinancing your home: If you can resume playing your mortgage but are looking for ways to lower your monthly payments, refinancing after forbearance ends could be a good move. Extending your loan term and lowering your interest rate will make repaying your mortgage even easier. You can visit Credible to get in touch with experienced loan officers and get their mortgage questions answered.

WHAT HAPPENS AFTER MORTGAGE FORBEARANCE ENDS?

The bottom line

The coronavirus pandemic has caused financial problems for many homeowners, but forbearance plans helped ease the burden. If you’re nearing the end of mortgage forbearance, there are many options available to you, including extending your forbearance, payment relief through deferral and refinancing. 

If you’re thinking of refinancing, consider using Credible's free online tool to easily compare multiple lenders and see prequalified rates in as little as three minutes.

Have a finance-related question, but don't know who to ask? Email The Credible Money Expert at moneyexpert@credible.com and your question might be answered by Credible in our Money Expert column.