Is Your Mortgage Coming Out of Forbearance? Here's What to Do

Many loans will be exiting forbearance soon. Here are some steps to take if yours is one of them.

When the coronavirus outbreak first struck, it quickly became clear that millions of Americans would need financial assistance in the wake of widespread job loss. To that end, the CARES Act was signed into law in March of 2020, and one of the relief measures it offered was mortgage forbearance.

Forbearance has long existed in the context of home loans, and it allows mortgage borrowers to pause their payments for a preset period of time. Under the CARES Act, any homeowner who requested forbearance had to be granted that option after attesting to financial hardship (whereas outside of the CARES Act, forbearance requests could be denied).

But forbearance under the CARES Act was only set up to last 18 months, and at this point, those who paused their loan payments early on in the pandemic will soon see that protection come to an end. If you're in this situation, here's what to do.

1. Figure out if you can afford to keep paying your mortgage

At this point, many people have thankfully recovered financially from the impact of the pandemic. If that's the case for you, then you may be able to start paying your mortgage again.

But if you haven't fully recovered financially -- say, you're still paying off debt you were forced to rack up, or you haven't found a job that pays what your former role paid you -- then you may not be as comfortable resuming your mortgage payments.

Take a look at your finances and see whether you can afford to start making regular mortgage payments again. If you can't, you do have options, but it's important to honestly assess the situation.

2. Reach out to your loan servicer for help if you want to stay in your home

Loan servicers are being told they need to work with borrowers coming out of forbearance to help them stay in their homes. If you can't make your regular mortgage payments once forbearance comes to an end, reach out to your loan servicer and explain your situation.

Your loan servicer will likely agree to modify the terms of your mortgage so that you're able to keep up with it. In many cases, that will mean extending the length of your repayment period so your monthly payments are smaller and easier to manage.

3. Find a real estate agent to help you sell your home

If you can't afford your mortgage once forbearance runs out, or you simply no longer want to deal with the expense of owning your home, you may have the option to sell it for enough money to pay off your mortgage and walk away clean. These days, home values are up on a national level, so if the idea of paying a mortgage again worries you, you may be able to sell your home and then start fresh with a less expensive place to live.

Say you owe $240,000 on your mortgage and your home would normally only sell for $220,000. Because home values have risen and the demand for homes is so high, you may, in today's market, manage to command $260,000 for your home. That would be enough to cover your home loan balance plus the typical fee charged by a real estate agent.

A lot of homeowners will soon see their mortgages exit forbearance. The good news is that if you're in that situation, you do have different avenues to explore. The key is to start thinking about them now, before that protection officially runs out.