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Mortgage Forbearance vs Deferral

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Given the new COVID-19 crisis around the world right now, many tenants are left not being able to pay their rents leaving their landlords on the hook for their mortgages. However, the landlords have been counting on that income to be able to pay their mortgages given the myriad of different circumstances that could have happened to them due to COVID as well. What should you do if you can’t pay your mortgage right now? Is there help? Do you need help with your personal home as well?

Let us try to answer a few of those questions…

What Is Mortgage Forbearance?

Mortgage forbearance is a term that is used when speaking about pushing payments back or allowing a Landlord to temporarily not make their monthly mortgage payment.  At the end of a forbearance period, the amount of the payment deferred becomes due and payable as a lump sum.  A lot of the time the borrower will not realize this and will not be able to pay the full amount due immediately and therefore the lender will allow for a payment plan to be created.  

Mortgage forbearance reaches close to 7% of loans: Mortgage Bankers Association survey

What Is Mortgage Deferment?

Mortgage deferment is similar to forbearance in that the payment can be temporarily stopped, but a deferment payment may allow for the amount outstanding to be repaid over time or have it added at the end of their loan period.  

Why Do I Care What The Difference Is?

As a landlord owning investment property, this can change how you will select to temporarily stop your payments.  For example, if you have a higher cash flow property, then you may want to defer to just pay off the balance that you have deferred at an earlier time and you have the cash flow to do it when everyone is paying.  If this does not work, you may choose to go through forbearance because you know that when you sell the property you will be able to pay the lump sum without a problem, but right now you need the cash flow to be able to operate the income property. 

As always, in my opinion, it is best to keep your debts paid as current as possible because that money will come due at some time, so you might as well just pay it now if you can afford it, and if there is truly an issue with being able to repay then be upfront about it and take care of it up front with your lenders to show that you are being proactive about the problem. 

*Disclaimer* This information is for informational purposes only.  We recommend that you seek the counsel of a specialized loan broker, attorney, and/or CPA prior to making any investment decisions. 
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About The Author
Sanjeev Advani

• Hundreds of Investment Real Estate transactions successfully closed • 350+ Units currently under Property Management • 3+ Years of Construction Management Experience • Certified Property Manager, CCIM (In Progress) • Bachelors in Finance • Bakersfield, CA Native Deep Dive: I have been licensed in real estate for almost 10 years, and I have been specializing in investment and commercial real estate for the past 6 years. Through the years I have worked with Real Estate Developers, Investors, Average Joes, and many more. I am a Bakersfield native, and my educational background is in Finance. I have just completed the CPM (Certified Property Manager) certification which is one of the most prestigious designations in the Property Management Industry, with less than 1800 members world wide. I am also the President of the Board for Habitat for Humanity Golden Empire, the Vice President of the Board for Income Property Association of Kern County (IPAK), and Vice Chair of the Commercial Investment committee at the Board of Realtors. I look forward to working with you towards your real estate investment goals. Sunny Advani California Agent Lic# 01869863 | California Broker Lic# 02012941 Email: Sunny@RE-Synergy.com | Phone: +1 661 235 5726