On Friday, March 27, 2020, the Coronavirus Aid, Relief, and Economic Security (CARES) Act went into effect. The CARES Act was designed to provide assistance to those who have been financially affected by the COVID-19 pandemic. This includes potentially offering mortgage forbearance to homeowners.
This is not to be confused with mortgage forgiveness. Essentially, forbearance is a temporary suspension of mortgage payments that will need to be paid off at a later date. These are referred to as “deferred payments.”
Let's say your monthly mortgage payment is $1,500, and your lender grants you a forbearance period of 6 months. That means that after 7 months, you will owe your lender a total of $10,500. That's $1,500 for each of the 6 months that your payments were being deferred, plus the current months payment.
This forbearance period allows homeowners to get their finances in order while being able to stay in their homes without the risk of foreclosure. but, it is important that understand that this is not the same as mortgage forgiveness.
Forbearance can be very risky though, and should only be considered once all other options have been exhausted. Borrowers who fail to catch up on their deferred payments could wind up losing their home once the forbearance period is over.
Visit Jet Direct’s COVID-19 page for more information on forbearance and other frequently asked questions.