Pros and cons of mortgage forbearance

Mortgage forbearance offers temporary payment relief for homeowners facing financial hardship, but it's not without trade-offs. While this option can help during financial hardship, it may also impact your credit score, create long-term obligations on your loan and further your delinquency.Understanding both the benefits and drawbacks of this form of mortgage assistance is essential to determining whether forbearance is the right solution for your situation.

Is mortgage forbearance a good idea?

Home loan forbearance can be a good idea for people facing financial difficulty because it offers them an opportunity to have their mortgage payments temporarily reduced or paused. Forbearances can help relieve stress during a short-term financial hardship.

You get space to breathe while you sort out your financial. It can have a negative impact on your credit, but not one nearly as severe as skipping payments would cause.

Mortgage forbearance requirements

If you’re facing an ongoing financial hardship, call your loan servicer. Explain the situation to them before you ever miss a payment. Your mortgage servicer will then determine if you qualify for forbearance. Your mortgage lender may request some documentation and information, including:

• Details on your monthly take-home pay
• An itemized list of your monthly household expenses
• Any applicable unemployment benefits
• An overview of the financial hardship you’re facing and its cause
• Information on when you expect the financial hardship to be resolved
• Documents that substantiate your claim of financial hardship

Mortgage forbearance repayment options

If your lender approves a mortgage forbearance, your payments will be paused or reduced for the period of that forbearance..

Once forbearance ends and you’re, hopefully, back on your feet financially, you’ll have missed a number of payments and need to catch up on your mortgage. There are a few ways to do this:

• Lump sum. The most basic option is to pay the full amount you owe from your missed payments when forbearance ends. This option allows you to immediately get your loan back on track without additional impact to your credit or loan. If you know your financial hardship will end when you receive a back pay or another form of payment this option is right for you.
• Repayment plan. A repayment plan spreads the money you owe over multiple months. Repayment plans are typically between 2-3 months long and your servicer will determine the length you qualify for. For example, if you missed three payments during the forbearance period and you are approved for a three month repayment plan you would pay double the amount for three months.
• Loan modification. Loan modification takes the past due balance and adds it to your principal balance while adjusting the details of your loan, such as its rate and term allowing you to bring your loan current without a lump sum payment or repayment plan. A modification is a permanent adjustment to your mortgage
• Payment deferral. Payment deferral lets you move the missed payments to the end of your loan, effectively extending it’s term by the number of months your loan was in forbearance for. Only certain investors allow deferrals. You must apply for and receive approval before your servicer can move forward with a deferral.

What options you have can vary based on your lender and loan type.

Pros of mortgage forbearance

Mortgage forbearance offers several advantages, including the ability to work with your lender to create a plan that fits your budget and helps get your monthly budget back on track.

Avoid foreclosure

The difference between forbearance and foreclosure is significant. Foreclosure is a legal process where a bank, a credit union, or another financial lender takes possession of your property because of missed payments. It’s a last resort for lenders that can happen if you miss too many payments.

Once the forbearance period ends, homeowners must resume their mortgage payments and pay back the outstanding balance from the forbearance period, including any interest or fees, either in a lump sum or through a loss mitigation program such as a repayment plan or loan modification. If a homeowner is able to meet the conditions of forbearance they may be able to stay in their homes and avoid foreclosure.

Maintain residence

Stable housing is as critical as getting a new job to get back on your feet. Data from the Federal Housing Finance Administration shows that since 2008, more than 7.2 million people have applied for help with loans, and more than 6.5 million have been able to stay in their homes, a rate over 90%.

That means that of the 50,096 foreclosure prevention actions started in the third quarter of 2025, more than 45,000 people were likely to keep their home because of forbearance or other assistance.

Create lender goodwill

Mortgage forbearance allows you to work with your loan servicer and open lines of communication with them. If you are approved for forbearance, making your payments in full and on the approved timeline as well as adjusting your budget and lifestyle to meet your obligations will show your servicer that you’re serious about staying in your home.

Cons of mortgage forbearance

Mortgage forbearance also has downsides, including higher payments and potential dings to your credit score. That doesn’t mean forbearance is bad. But let’s look at the downsides of mortgage forbearance.

Lender entitlement in case of home sale

If the sale of a home is allowed under the terms of a forbearance plan, state lenders will recover your missed payments from the sale of your home. Any amount owed to your lender becomes payable from the sale of your property. Forbearance does not reduce your balance owed and may increase the total outstanding. Amounts deferred under forbearance are still owed to the lender.

It’s extremely important to adhere to the payment plan that you establish with your servicer if you are approved for forbearance. If you don't make any payments during the forbearance, you will be further delinquent and much closer to foreclosure at the end of the forbearance period.

Higher payments later on

Forbearance allows homeowners to find a repayment option that works for all parties and provides much-needed financial relief. Once the forbearance period ends, you’ll resume your monthly mortgage payments, including the payment of any reduced or skipped payments during the grace period.

Because interest continues to accrue while the loan is in forbearance, you should prepare for the possibility of higher monthly payments and possibly even a higher interest rate after the forbearance period ends.

Keep in mind that attempts to refinance the loan could be difficult, as lenders and investors may require you to have completed your workout plan post-forbearance to be eligible for a new mortgage.

Negative effects on your credit

Unless your loan servicer specifies otherwise, they will report your mortgage forbearance to the credit bureaus, which can lower your credit score because it shows a period when you weren’t making mortgage payments. Future lenders may consider your mortgage forbearance when assessing your creditworthiness and may charge higher interest rates because of the financial difficulty you experienced in the past.

Alternatives to mortgage forbearance

If you can make your monthly mortgage with a little belt-tightening, you may want to pursue that avenue rather than apply for mortgage forbearance. Also consider how long you may need assistance. Mortgage forbearance is a short-term, cash-saving strategy that won’t work for everyone. Here are some alternatives:

• Asking for help from friends and family
• Considering a no-closing-cost refinance
• Reassessing tax deductions to increase monthly income
• Talking to your lender about other mortgage relief options

The bottom line: Forbearance may allow you to save your home

Mortgage forbearance is an option for homeowners who are facing temporary financial stress and need help with their mortgage payment. While you may face damage to your credit, forbearance lets you keep your home and get back on your feet financially. Just make sure you’re prepared for the repayment plan that will begin after your forbearance ends.

If a loss of income or other circumstances are straining your budget, you’ll want to consider giving your servicer a call to discuss mortgage forbearance today.

Forbearance is a temporary solution. If you’re in need of a more permanent fix to the challenges you’re facing, the ultimate outcome may be a refinance or loan modification. Contact your servicer. Rocket Mortgage clients looking for relief can fill out our Application for Success.