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Key takeaways
- Deferment and forbearance are sometimes used interchangeably, but they’re not the same.
- If your mortgage is in forbearance and you’ve temporarily stopped making payments, deferment is one option for making up the missed payments.
- Deferment lets you delay repaying the overdue payments until the end of your loan term, and interest does not accrue on the amount owed.
For homeowners facing tough times, it’s possible to postpone monthly payments and still keep your house through a process known as deferment. Deferring your mortgage payments is not the same as entering into a forbearance plan, though the two options are sometimes incorrectly used interchangeably.
What is mortgage deferment?
Mortgage deferment is one option to handle repaying the payments you skip while your mortgage is in forbearance. It refers to an agreement between the lender and the borrower to add the overdue payments to the end of the loan term. This amount becomes payable — often in a lump sum — once the loan term ends, when you sell your home or if you choose to refinance to another mortgage. The amount owed during a deferment will not accrue interest.
Mortgage forbearance vs. deferment
Key terms
- Deferment
- Mortgage deferment is an option that adds overdue payments to the end of the loan term, and interest does not accrue on these payments.
- Forbearance
- Mortgage forbearance is an option that allows borrowers to delay or lower their mortgage payments while they are experiencing a financial hardship, such as a job loss, illness or other setback. Interest still accrues on the loan during forbearance.
If your mortgage goes into forbearance, you’ll need to plan to make up the payments you missed during that period, and deferment is one option that might be available to you.
Forbearance is one of the most common means of relief for homeowners facing a short-term obstacle to paying their mortgage. When you put your mortgage into forbearance, you temporarily stop making monthly payments (or make lower payments) while you sort out whatever hardship has prevented you from paying. Mortgage payments are typically suspended for three to six months, but the time could be longer or shorter depending on your financial situation.
When the forbearance period ends, there are a few ways borrowers can repay the missed amount, one of which includes deferment. But before you can defer mortgage payments, your servicer will determine if you’re eligible based on how many payments you’ve missed and your potential to resume making payments.
How to qualify for mortgage deferment
How can you defer a mortgage payment (or payments) after forbearance ends? Here are the steps to take:
- Consult with your lender or loan servicer as soon as possible. This communication will tell you if the lender or servicer offers deferment and, if so, what requirements you must meet to qualify.
- Apply for deferment. Depending on the lender or servicer, there may be an application to complete to begin the deferment process.
- Wait for approval, but start planning ahead. While you wait to find out if your deferment request is approved, continue making normal payments. Also, start thinking about how you’ll repay the deferred payments when they come due.
How to decide if deferment is right for you
If you’re in a difficult financial situation and you’ve exhausted pandemic forbearance, a deferment might be the best option.
— Jeff Ostrowski, Principal Writer, Bankrate
A mortgage deferment after forbearance may be a good option if you know your financial hardship is temporary and you want to keep your home.
Here are some things to consider as you determine if deferment is the right option for you:
- Do you have proof of financial hardship? Most lenders will require proof.
- Will you be able to make up those deferred mortgage payments in a lump sum when the due date comes? If it’s unlikely, or if your financial woes are more long term, consider alternatives to deferment, such as a loan modification.
“If you’re in a difficult financial situation and you’ve exhausted pandemic forbearance, a deferment might be the best option,” says Jeff Ostrowski, principal writer at Bankrate. “Homeowners struggling to pay the mortgage also want to consider selling. Home values in many areas are at or near record highs, and selling your home can give you a fresh start.”
Mortgage relief FAQ
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In most cases, forbearance won’t count as a strike on your credit report; your lender or servicer will simply report the loan as current. Your repayment plan (deferment or otherwise) shouldn’t impact your credit, either, provided you repay on time.Before agreeing to forbearance or any other form of relief, confirm with your servicer how the arrangement might affect your credit, and make sure you understand what you’re responsible for paying and when.
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Will mortgage companies defer payments for all borrowers? No. If you don’t qualify for this type of repayment after forbearance, you can look into alternative repayment options, depending on your loan type. For USDA and VA loans, you may be able to start a repayment plan or loan modification, which gives you a longer loan term. With FHA loans, loan modification is another repayment option.
For conventional loans, your options may include reinstatement (where you repay all of your missed payments when your forbearance ends) and a repayment plan (where you can pay it back in installments). You might also be able to refinance your loan or apply for the Flex Modification program (FMP) to extend your loan term or lower your interest rate.
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