How to Defer a Mortgage Payment

Mortgage payment deferment offers a temporary solution for homeowners facing unexpected financial challenges. This option allows individuals to postpone a portion or all of their monthly mortgage payments for a specified period. It provides a pathway to financial stability during difficult times, helping homeowners avoid delinquency and potential foreclosure when unforeseen circumstances impact their ability to meet their obligations.

Understanding Mortgage Payment Deferment

Mortgage payment deferment helps homeowners manage their mortgage during temporary financial hardship. Unlike forbearance, which temporarily pauses or reduces payments, deferment typically moves missed payments to the end of the loan term. This distinction is important because while forbearance provides immediate relief, deferment addresses how those paused payments will eventually be repaid.

Homeowners seek deferment due to financial setbacks. Common qualifying events include job loss, significant illness, natural disasters, or other serious life events like divorce or the death of a family member that impacts household income. These circumstances create a temporary inability to make regular mortgage payments.

Eligibility for mortgage deferment depends on factors like the financial hardship’s nature and the borrower’s payment history. Lenders require proof that the hardship is temporary and that the homeowner can resume regular payments after the deferment period. Some loans, such as those backed by Fannie Mae or Freddie Mac, may have specific criteria, including the loan being a conventional, first-lien mortgage held for at least 12 months, and the borrower being between two and six months delinquent.

Gathering Information for Your Request

Before contacting a mortgage servicer for deferment, compile specific information and documents. This helps streamline the application process and ensures all necessary details are available. Identifying your mortgage account number and the servicer’s exact name is a primary step, as this information is required for communication.

Gathering comprehensive financial documentation is crucial. This typically includes recent pay stubs (last 30 days) to demonstrate current income. Bank statements for the past one to two months, for all accounts held by individuals on the mortgage, are requested to show financial activity and available funds. For self-employed individuals, a current year profit and loss statement may be required instead of pay stubs.

Be prepared to explain your financial hardship. This often takes the form of a hardship letter, detailing the reason for your inability to make payments, such as job loss or medical emergency. The servicer may request a signed IRS Form 4506-T, authorizing them to verify your tax return information. Providing an estimate of your current monthly expenses can support your request.

Submitting Your Deferment Request

Once information and documents are prepared, submit your deferment request to your mortgage servicer. Homeowners can initiate this process through various channels, including phone, online portal, or written application via mail or fax. It is advisable to contact the servicer as soon as a financial hardship arises, ideally before missing a payment.

During the initial communication, the servicer will ask questions about your financial situation and hardship. They will guide you on the forms or documentation required for your loan. This interaction is an opportunity to clarify uncertainties regarding the deferment process or submission materials. Ensure you understand what information needs to be submitted and in what format.

After you submit your complete application, the servicer will review your request. Servicers are required to acknowledge receipt within five business days and, once complete, provide a decision within 30 calendar days. Maintain communication with your servicer throughout this review period and promptly provide any additional information requested to avoid delays in processing your deferment.

What Happens After Deferment

After a mortgage payment deferment period concludes, homeowners must understand how missed payments are handled and the financial implications. The most common method for managing deferred payments is to add them to the end of the loan term. This means the due date for these payments is postponed until the original maturity date of the mortgage, or earlier if the property is sold or refinanced. Often, these deferred amounts are due as a lump sum, sometimes referred to as a balloon payment, at the loan’s maturity.

A notable advantage of this approach is that interest does not accrue on the deferred principal and interest payments. This is true if the deferment follows a period of forbearance, where interest may have accrued on missed payments during forbearance. However, distinguish this from a “deferred interest mortgage” product, where interest can accumulate and be added to the loan balance, potentially leading to negative amortization.

Homeowners should work with their servicer to confirm the terms of their post-deferment repayment plan. Other options include a structured repayment plan, where missed payments are spread out over a shorter period by adding a specific amount to each regular monthly payment. A loan modification, which permanently alters the loan terms, could be considered if the financial hardship is long-term, potentially extending the loan term or adjusting the interest rate. Understanding these new terms and responsibilities is important for successfully resuming mortgage payments and avoiding future financial difficulties.