Mortgage Forbearance Coming to an End? 3 Steps to Take Now

Mortgage forbearance won't last forever. Here's what to do if it's coming to a close.

Mortgage forbearance has been a lifeline for many borrowers during the coronavirus pandemic. Under normal circumstances, forbearance lets you pause your monthly mortgage payments for a period of time that's determined by your mortgage lender. But under the CARES Act, all borrowers are entitled to up to 15 months of forbearance.

If you put your mortgage into forbearance early on in the pandemic, then you may be required to start making payments on your loan again in the coming months. If you can manage those payments, great -- you're all set. But if not, here are a few steps to take now.

1. Talk to your lender about an extension

Originally, borrowers who paused their mortgage payments during the pandemic were granted up to 360 days of forbearance, but that was recently extended by three extra months. And that doesn't mean you can't qualify for an additional extension. If your financial situation hasn't improved as your 15 months of forbearance come to an end, talk to your lender about getting a few more months. Your lender may not be required to grant that request, but it may be willing to work with you.

2. Ask to modify your mortgage

It could take many people years to recover from the financial impact of the coronavirus pandemic. If your income has been reduced, it pays to talk to your lender about modifying the terms of your home loan once your forbearance ends. With loan modification, you don't get a new mortgage -- you simply adjust the terms of your current loan. Your lender might agree to extend the number of years left on your loan, thereby resulting in lower ongoing monthly payments.

3. See if you can refinance

When you refinance a mortgage, you swap your existing home loan for a new one with more favorable terms. If you want to stay in your home after forbearance ends but you can't keep up with your current monthly payments, see if refinancing would help. To be clear, you can't refinance while your loan is in forbearance. But if you stay current on your payments for three months once forbearance ends, you may be eligible for a refinance at that point.

Take steps before the close of your forbearance period to put yourself in a better position. Do what you can to boost your credit score so you'll qualify for a refinance. Also, aim to sock away some money so you can at least make those three months of payments. If you can hang in long enough, you may be in line for a much lower mortgage payment once your new loan is in place.

Remember, mortgage forbearance under the CARES Act has already been extended once, so it could happen again. But if the end of your forbearance period starts to draw near, make sure you have a game plan. The last thing you want to do is exit forbearance unprepared and immediately start to fall behind on your payments.