The difference between mortgage forbearance and deferment - Business Insider

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There are a couple distinctions between forbearance and deferment, but the coronavirus is making them more confusing than ever

With forbearance, interest always continues to accrue, even when payments are paused. When you enroll in deferment, interest may or may not keep building, depending on your lender.

With forbearance, you typically repay the paused amount in one lump sum after the forbearance period ends. So if you paused payments for three months, at the end of the three-month period you'd pay everything you owe at once.Your lender might require you to repay the amount over time so your monthly payments increase, or your payments could be added to the end of your loan term.

. But the option is for homeowners to pay back the deferred amount in one lump sum when they sell, refinance, or pay off their home completely. Usually, mortgage deferment takes place over an extended period of time, not all at once. Why isn't the FHFA deferral option being referred to as forbearance, then? It's hard to say. Maybe because people can repay at the end of their loan term rather than at the end of the forbearance period.interchangeably on the COVID-19 relief pages of their websites. Or they claim to offer one or the other, but the description of the relief program doesn't match the typical definition of either word.

In general, try to get as much information as possible before accepting mortgage relief during the pandemic. Mortgage deferment and forbearance can be helpful, but you don't want any surprises down the road that could cause long-term problems.

 

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