What Happens When The COVID-19 Forbearance Is Over?

There’s no doubt that COVID-19 has taken a financial toll on our country. Millions have lost their jobs, thrusting many of them into a dire financial predicament. If you’re in this position, then the steps the federal government has taken to provide relief might comfort you, but you need to carefully consider what these programs really mean for you before opting into them.

One avenue of relief provided by the government is mortgage payment forbearance through the CARES Act. Through this program, you can stop payments for up to 180 days if you can demonstrate that the pandemic has caused you financial hardship and the federal government backs your mortgage. That 180 day forbearance period can be extended for another 180 days if you can show ongoing hardship at the time the first 180-day period runs. Sound good, right? Unfortunately, it might not be as beneficial as you hope.

This is because the Act doesn’t specify how those missed payments are to be made up. Therefore, some lenders are requiring borrowers to pay the full amount of payments in forbearance in a lump some at the time that the forbearance ends. This could leave you facing thousands, perhaps even tens of thousands, of dollars in mortgage payments all at once within the next six months to a year. This might leave you completely overwhelmed and unable to make ends meet.

Other lenders are taking a different approach. Some are simply taking those missed payments and extending the term of the loan, meaning you’ll continue to pay the same amount, just for a little bit longer than you had anticipated. Others are making the amount due in full at the end of the loan’s original term, which, again, could eventually put you in a financial bind.

With so much uncertainty, if you’re facing financial hardship due to COVID-19 then you’re best off contacting you lender to see if you qualify for forbearance and, if so, what repayment will look like. You might also want to discuss alternative arrangements that suit your needs and prevent you from getting with a massive and sudden bill. Hopefully then you’ll know exactly what you’re getting into so that you can protect your financial interests as fully as possible moving forward.