Deferrals: Adding Missed Mortgage Payments to the End of Your Loan

Deferrals: Adding Missed Mortgage Payments to the End of Your Loan

Jul 15 2020

This is part of our ongoing series on mortgage relief options and how to handle your loan in a crisis.

If you received a COVID-19 forbearance and are exploring options to catch up on your missed payments, there’s a new program you may want to make note of. 

As of July 1, borrowers with Freddie Mac and Fannie Mae loans now have access to something called a mortgage payment “deferral.” It’s a form of loss mitigation to help you get back on track with your mortgage after you received a forbearance.

Here’s the tea: 

Payment deferrals

(Head’s up: To find out if your loan is owned by Fannie Mae or Freddie Mac, contact your servicer or check out our loan lookup guide.) 

If you receive a payment deferral, up to 12 months of your principal, interest, and any other expenses that were advanced by your mortgage servicer are deferred into a balance that becomes due at the end of your mortgage.

You’ll pay the missed payments in monthly installments like your mortgage (or in one lump sum if you can afford it) either when you sell your house, pay off your mortgage, or refinance.

Pretty neat, right? Also cool: The deferred balance will not accrue interest, so it will remain at the same amount.

Keep in mind, however, that your options after a forbearance will be determined by your loan servicer, based on what they offer and their assessment of your financial situation. You can ask about a payment deferral, for example, but that doesn’t mean you’ll receive one.

Also of note, as of July 2020 there are different types of payment deferral programs. For example, for a COVID-19 forbearance, there is a COVID-19 deferral.

Meanwhile, there are also payment deferral programs for traditional forbearances that are not related to COVID-19. There is also a deferral plan for disaster-related forbearances (when your hardship follows a disaster like a hurricane or an earthquake).

Other available options

Along with a payment deferral, there are other options to get caught up after a forbearance. These include:

  • Lump sum: Technically referred to as a “reinstatement,” this is when you pay off the entire amount you missed during a forbearance with one single payment. 
  • Repayment plan: The amount you missed during a forbearance will be divided into your monthly mortgage payments, so you’ll pay a little extra for a few months until it’s paid off.  
  • Loan modification: The original terms of your loan are changed to make your monthly payments more manageable and address their ongoing hardship.

If you’re interested in a COVID-19 payment deferral, reach out to your loan servicer (the contact information is on your mortgage statement) as soon as possible. You’ll want to figure out how you’re going to pay back your missed payments before your forbearance period ends.

Hang in there, you’ll be back on track in no time! In the meantime, here are some other questions you may be wondering:

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