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How to Defer Your Mortgage

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These days, many people have lost their jobs or face paying bills on a lower income. It’s more important than ever that Americans find a way to keep up with their mortgage. Unfortunately, quarantine and shelter-in-place mandates have caused many people to lose their only sources of income. 

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With few options left, lawmakers have had no choice but to step in and help. Many lenders are required to offer forbearance on their mortgage payments. Is this stay of foreclosure a helpful reprieve during a trying time or a larger problem just waiting to happen once the crisis has abated? 

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Why defer your mortgage?

Deferring your mortgage takes some of the financial pressure off at least for the time being. Many people were even offered reduced monthly payments on their home loans, although this is ultimately determined by the lender. It’s hard to argue with the 3.5 million mortgage borrowers who have already requested forbearance at this time. 

Deferment is a good way to catch up and save some money while you wait out the impact of the COVID-19 pandemic. That said, forbearance isn't forgiveness. No matter how much time a lender gives you on a loan, the bill will eventually come due. 

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Are there negatives attached to deferring your mortgage?

As wonderful as they may seem, mortgage forbearance or deferments include a few provisos that many people might not like. First, only mortgage borrowers with a federally-backed home loan can take advantage of these types of deferments. The same rings true for federally-backed student loans as well. 

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Also, there's still the sad fact that borrowers will eventually need to work out a repayment plan with their lender. In some cases, the postponed payments will be due all at once at the end of a 90-day grace period. An individual might not be able to pay the bill at the end of the grace period. This dire result isn't always the case, but it happens with some loans. 

How to defer a mortgage

If you are currently experiencing financial hardship as a result of the COVID-19 pandemic and your loan is federally funded, let's say through Fannie Mae, then you might be eligible for deferment. Fannie Mae offers a COVID-19 payment deferral, which lets you defer up to 12 months of overdue amounts. You can use the Loan Lookup tool on the company's website to see if they own your loan. 

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If not, most lenders have plans on their websites with instructions for deferment. If you still aren't sure, call your lender and ask. Sometimes the simplest answer is the most informative. 

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Should you defer a mortgage payment?

Deferring your mortgage payment is ultimately up to you, but it’s important to understand the caveats attached to any deal. Even though you might feel relieved at first, don't forget that you may eventually be on the hook for the full amount. If you don't have an income currently, it isn't guaranteed that the situation will improve in a few months. Make sure that you understand the repayment terms before you agree to any forbearance program. 

Will mortgage deferment hurt your credit?

It's an unusual time and these are extraordinary circumstances, so any aid or forbearance related to the Coronavirus Aid, Relief, and Economic Security (CARES) Act won't have a negative impact on your credit score. Deferment or postponement won't cause your score to go down either. 

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