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For homeowners facing tough times, it’s possible to postpone monthly payments and still keep your house, a process known as deferment. Deferring your mortgage payments is not the same as entering into a forbearance plan, though the two options are used interchangeably. Here’s the difference.
What is mortgage deferment?
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. (Think job loss.) Typically, borrowers put their loan into forbearance for six months to a year, but the time frame can be longer or shorter.
If your mortgage is in forbearance, deferment describes how you’ll repay the payments you missed during that period. With a deferment, you’ll pay all of the missed amount, likely in a single lump sum, either when your mortgage term ends or when you sell your home or refinance to another mortgage.
A mortgage deferment is just one way to repay the amount you skipped while in forbearance; you might not automatically qualify for this option (more on that below). One alternative is to repay the missed amount in installments with your regular monthly mortgage payment, once the forbearance expires and you resume your usual payments.
If you can’t repay the deferred amount in full when it comes due, or otherwise can’t afford your monthly payment, contact your mortgage lender or servicer to discuss more permanent solutions, such as a loan modification.
Mortgage forbearance vs. deferment
Forbearance is one of the most common means of relief for homeowners facing a short-term obstacle to paying their mortgage. It’s generally the best course of action when you know your hardship is only temporary. When the forbearance period ends, there are a few ways borrowers can repay the missed amount, including deferment.
You’ll need to consult with your lender or servicer to arrange for forbearance and see if you qualify for deferment. Don’t stop making payments without establishing a relief and repayment plan, in writing, with your servicer. If you stop making payments without an agreed-to plan, your lender could initiate the foreclosure process.
Does deferment or forbearance hurt your credit?
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. In addition, be honest with yourself: Will you realistically be able to make up those payments? If it’s unlikely, consider selling your home and moving to a more affordable place.
How to qualify for mortgage deferment
If you’re interested in deferring payments after forbearance ends, consult with your servicer early on. Depending on your situation, you might not automatically qualify for this type of repayment structure, or you might be limited in how many payments you can defer.
