The temporary suspension of mortgage payments is known as a mortgage deferral. Deferred mortgage payments provide short-term relief when experiencing financial hardship.
Your lender needs to approve the request to defer mortgage payments. Once approved, you’re permitted to stop making payments on your mortgage temporarily. Do not worry about late charges (in most cases) or your lender reporting missed payments to the credit bureaus.
For approved requests, lenders report to the credit bureaus that your payments are currently being deferred. The deferred mortgage payments won’t directly help or hurt your credit score.
How do deferred mortgage payments work?
The application process varies depending on the type of mortgage you have and the lender you’re with. There may be several options regarding the length of time you need relief, unpaid mortgage amount and accrued interest. In most cases, the interest is added to the principal amount, it doesn’t get waived. The interest gets tacked onto the back of the mortgage. Each lender has its own policies and guidelines for approving deferred mortgage payments. Also, lenders can refuse mortgage deferral for various reasons.
Before you contact your lender, be ready to explain the nature of your financial difficulties to prove that it’s a temporary situation, and you already have a long-term solution that you’re working on to regain financial stability. You’re required to provide proof of financial hardship when applying for a mortgage deferral. Documents may be requested to prove that you are facing financial difficulties.
Remember to continue making your payments until you’re confident that your lender has approved your application to stop making payments. Note that these arrangements are temporary, and you may need to re-apply if you want to keep postponing payments.