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What Is A Mortgage Forbearance Agreement And How Does It Work?

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What Is A Mortgage Forbearance Agreement And How Does It Work?

The idea of a mortgage forbearance agreement can be scary for many homeowners. It often means that you have reached your limit with the lender and need to make some changes to keep your home. But what is a mortgage forbearance agreement? This blog will discuss how they work, the different repayment options available, and the modifications borrowers can make to their mortgages to be able to afford their monthly payments.


What is a Mortgage Forbearance?

Forbearance is an agreement between you and your lender to provide you with temporary relief from paying your mortgage for a certain period. The lender may choose to lower or pause the payments entirely.

Borrowers ask for forbearance when they can no longer make monthly payments because of a change in their financial situation, such as illness, job loss, or natural disaster. Getting a forbearance does not mean that you are off the hook. You will still owe your lender the money that you deferred.


Repayment Options

With a forbearance plan in place, the lender would not initiate a foreclosure. In return, after the forbearance period ends, you will have to resume making payments on your principal, interest, taxes, and insurance.

You have several options to do this depending on what you agree with your lender:

  • Repayment Plan: A portion of the amount you owe will be added to your monthly mortgage payments
  • Deferral or Partial Claim: These options will move your missed payments to the end of your loan or put them into a subordinate lien repayable only when you refinance or terminate your mortgage
  • Modification: Your payment can be reduced to an affordable amount, and your missed payments will be added to the amount you owe. With a lower monthly price, it might take you longer to pay off your mortgage.
  • Reinstatement (Lump Sum): In this case, the lender would ask you to pay a lump sum of all the missed payments at the end of the forbearance period. Keep in mind that servicers cannot require you to pay a lump sum, so when you are being asked for reinstatement, make sure to ask about other options.



If you're struggling to meet your monthly mortgage payments due to a change in circumstance, you can choose to modify your loan. Keep in mind that a loan modification is a permanent restructuring of the loan where one or more of the terms are changed to provide a more affordable payment. If you think you can meet your mortgage payments if you modified your loan, this option can help you avoid foreclosure.


With a modification, your lender might agree to do one or more of the following:

  • Reduce the interest rate
  • Convert a variable interest rate to a fixed interest rate
  • Extend the term of the loan
  • Forbear some of the principal balance - which means that they will set aside a portion of the total debt before calculating your monthly payment.


To qualify for a modification, you will generally need to:

  • Provide all required documentation, including your financial statement, proof of income, recent tax returns, bank statements, and a headship statement
  • Show that you can make your current mortgage payment due to financial hardship.
  • Complete a trial period to demonstrate that you can afford the new monthly amount.


We hope that this article has given you a better understanding of mortgage forbearance agreements and your repayment options. If you think a mortgage forbearance is a practical option for you, we can help! Contact us today to get started.

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