When faced with unexpected circumstances that can impact your ability to make your mortgage payments, it’s important to act quickly. There are a few options that homeowners can take during times of financial difficulty, including mortgage payment deferral programs. Work with your mortgage professional to see if this is the best option for your situation.
What is mortgage payment deferral?
A mortgage payment deferral is an agreement between a borrower and lender to pause regular mortgage payments for a set period. At the end of the agreement, you are required to repay the missed payments and your payment schedule returns to normal.
A deferred mortgage payment program is only a temporary measure and comes with both benefits and drawbacks. While it can help with short-term cash flow, you may end up paying significantly more interest on your mortgage.
Five key things to know
1. Mortgage payment deferrals are at the lender’s discretion.
Lenders have the legal right to timely mortgage payments and have the discretion to approve mortgage payment deferral requests. Eligibility and repayment details will depend on the lender and the situation.
2. You need to prove financial hardship.
A deffered mortgage payment program is intended for those who are struggling to make their mortgage payments. The lender will decline the request if you cannot prove a legitimate need, such as loss of employment or a portion of income.
3. Mortgage payment deferral is not mortgage forgiveness.
A mortgage payment deferral program only postpones your mortgage payments. The lender will expect you to repay all the missed payments at the end of the agreement.
4. Interest accumulates on the deferred payments.
When you defer your mortgage payments, the interest will accumulate on each deferred payment. The accrued interest is then added to the outstanding mortgage principal of your mortgage.
5. A mortgage payment deferral does not affect your credit score.
Since a deferred payment is approved by your lender, it’s not considered to be a missed payment. So, it will not appear on your credit report nor impact your score.
Thinking about deferring your mortgage payments?
It’s important that you speak with a mortgage professional beforehand to assess your current situation. They can also help you determine if you may be eligible for a mortgage deferral program and speak with the lender on your behalf.
Contact one of our mortgage specialists to discuss possible options based on your financial circumstances.