Forbearance is a temporary written agreement with your loan servicer to pause or reduce your payments while you’re facing financial hardship. The relief usually lasts three to twelve months, interest keeps accruing in almost every case, and the paused amount remains your responsibility once the period ends. It is not forgiveness, and understanding what forbearance is means understanding what you still owe when it’s over.
How Forbearance Works
When you enter forbearance, your servicer agrees in writing to accept reduced payments or no payments for a defined period. The agreement spells out how long the relief lasts, what (if anything) you owe each month during the window, and what happens when it ends.
The loans that commonly qualify include residential mortgages (both government-backed and conventional), federal and private student loans, and some auto loans. Terms vary by loan type. For Fannie Mae-backed mortgages, servicers can offer an initial forbearance of up to six months and extend it another six, for a cumulative maximum of twelve months without special approval.1Fannie Mae. Forbearance Plan Federal student loan servicers can grant forbearance for up to twelve months at a time.2Consumer Financial Protection Bureau. What Is Student Loan Forbearance? Private lenders set their own terms, which are often less generous than federal programs.
The first step is always contacting your specific servicer to ask what’s actually available on your loan.
What Forbearance Costs You
Interest keeps accruing on your balance the entire time you’re in forbearance. This applies to virtually all loan types, including both subsidized and unsubsidized federal student loans.3Cloudfront.net. Interest Capitalization on Federal Student Loans The government pays interest on subsidized loans during deferment, but that benefit does not extend to forbearance. Every month you skip a payment, the unpaid interest grows.
The real cost hits through a process called capitalization. When forbearance ends, your accumulated unpaid interest is added to the principal balance. You then owe interest on that larger number going forward. On a $100,000 mortgage at 5%, roughly $417 in interest accrues each month. After six months of forbearance, about $2,500 in unpaid interest gets folded into the balance, bringing it to $102,500. Future interest charges are calculated on that higher figure.
Before you accept forbearance, run the math. Multiply your outstanding balance by your annual interest rate, divide by twelve, and multiply by the months you expect to be in forbearance. That number is the minimum additional cost you’re agreeing to carry.
What You Owe When Forbearance Ends
When the relief period is over, you owe the accumulated missed payments plus accrued interest. How you address that depends on your loan type and your finances at that point. For federally backed mortgages, a lump-sum payment is explicitly not required.4Federal Housing Finance Agency. No Lump Sum Required at the End of Forbearance The same is true for FHA, VA, and USDA loans.5USDA Rural Development. CARES Act Forbearance Fact Sheet for Mortgagees and Servicers of FHA, VA, or USDA Loans Some private lenders may offer or expect a lump sum, so read your agreement carefully.
The realistic options for most borrowers are:
- Repayment plan. Your monthly payment temporarily increases so you can catch up over a few months to a year. The forborne amount is divided into installments added on top of your regular payment.
- Payment deferral. The missed payments are moved to the end of the loan as a non-interest-bearing balance, due when the loan matures, the property sells, or you refinance. For Fannie Mae loans, late fees and administrative charges are waived, and your interest rate and monthly payment stay the same.6Fannie Mae. Payment Deferral
- Loan modification. The lender permanently restructures your loan by lowering the interest rate, extending the repayment period, or both. You’ll need to requalify under new underwriting, and this is typically reserved for borrowers who can’t resume their original payment.
Payment deferrals have eligibility limits. Fannie Mae requires the loan to be at least twelve months old, between two and six months delinquent at evaluation, and no more than twelve cumulative months of payments can be deferred over the life of the loan.6Fannie Mae. Payment Deferral You also can’t be within 36 months of your loan’s maturity date.
Start talking to your servicer at least 30 days before your forbearance ends to work out which path fits.7Consumer Financial Protection Bureau. Exit Your Forbearance Carefully Servicers are required to reach out around that time. Don’t wait for the call.
Forbearance Versus Deferment
Both pause your payments. They handle interest very differently. During deferment on subsidized federal student loans, the government covers the interest that accrues, so your balance doesn’t grow.8Federal Student Aid. Student Loan Deferment During forbearance, you’re responsible for all interest on every loan type, subsidized or not.3Cloudfront.net. Interest Capitalization on Federal Student Loans
Deferment also has narrower eligibility. You typically qualify based on at least half-time enrollment in school, active military service, unemployment, economic hardship, or cancer treatment.8Federal Student Aid. Student Loan Deferment Forbearance covers a wider set of situations but costs more because of the interest. If you qualify for both, choose deferment.
How Forbearance Affects Your Credit
How forbearance shows up on your credit report depends on the loan and whether you were current before the agreement started. For federally backed mortgages reported under Fannie Mae and Freddie Mac guidelines, an approved forbearance should not result in your account being reported as delinquent. The key word is “approved.” If you stop paying without a formal agreement in place, your servicer will report missed payments as it would under normal circumstances.
Private servicers follow their own policies, and treatment can be less favorable. If you have a private student loan or a portfolio mortgage held by a bank, ask your servicer in writing exactly how the forbearance will be reported before you agree.
Even when the account itself is not reported as delinquent, lenders reviewing your file later may see that a forbearance occurred. Some mortgage underwriters treat a recent forbearance as a risk factor, which could affect your ability to refinance or take out a new loan for a period after it ends. The practical impact fades with time, but plan for some borrowing friction for a year or two.
Property Taxes, Insurance, and Escrow Don’t Pause
Pausing your mortgage payment does not pause your obligations to local tax authorities or your insurance carrier. If your mortgage includes an escrow account, your servicer should continue paying property taxes and insurance premiums on your behalf during forbearance.9Consumer Financial Protection Bureau. Manage Your Money During Forbearance Confirm this with your servicer early rather than assuming.
When forbearance ends, your escrow account will almost certainly show a shortage because no payments were flowing in while the servicer was still covering taxes and insurance. That shortage is spread across your future payments, so your monthly bill can go up even after you’ve handled the forborne amount itself.9Consumer Financial Protection Bureau. Manage Your Money During Forbearance Under Fannie Mae’s payment deferral program, escrow shortages are not included in the deferred balance and the servicer isn’t required to cover the gap, so expect to repay it through higher monthly escrow contributions.6Fannie Mae. Payment Deferral
If your mortgage has no escrow account, you pay taxes and insurance directly throughout the forbearance. Missing those payments can trigger tax liens or a lapsed insurance policy, either of which creates a far bigger problem than the one forbearance was meant to solve. The same goes for HOA and condo fees.
How to Request Forbearance
Contact your loan servicer as soon as you see trouble coming. Waiting until you’ve already missed payments narrows your options and can affect how your account is reported. Make the request before the account falls into default.
For mortgages, your servicer will ask you to explain the hardship and provide documentation. Depending on the loan program, this can include recent bank statements, proof of unemployment, or evidence of your monthly income and existing loan obligations.10FSA Partner Connect. Chapter 5 – Forbearance and Deferment Federal student loan forbearance is simpler and can often be requested over the phone.
For federal student loans, there are two categories. General (discretionary) forbearance covers broad financial difficulties, medical expenses, or job changes, and your servicer decides whether to grant it. Mandatory forbearance applies to specific situations set by law, and your servicer must approve it if you qualify.11Federal Student Aid. Loan Forbearance
Federal Protections for Mortgage Borrowers
Under federal Regulation X, your mortgage servicer must acknowledge a loss mitigation application within five business days and tell you whether it’s complete or what’s missing. Once you’ve submitted a complete application, the servicer has 30 days to evaluate you for all available options.12eCFR. 12 CFR 1024.41 – Loss Mitigation Procedures
These rules include a critical safeguard: a servicer cannot begin foreclosure proceedings until your mortgage is more than 120 days delinquent. If you submit a complete application before that first foreclosure filing, the servicer generally cannot move forward until it has finished evaluating your options and you’ve either been denied, rejected the offer, or failed to follow through on an agreement.12eCFR. 12 CFR 1024.41 – Loss Mitigation Procedures Filing early gives you the strongest legal protection.
Get everything in writing. Do not stop making payments until you have a formal agreement confirming the forbearance terms, including start date, end date, and what’s expected of you during the period.
Where to Get Free Help
You don’t need to pay anyone to help you through forbearance. HUD-certified housing counselors provide free foreclosure prevention counseling, including help with forbearance applications, understanding your servicer’s offers, and evaluating repayment options. You can find a counselor near you by calling 800-569-4287 or searching HUD’s housing counseling directory online.13HUD.gov. About Housing Counseling Be wary of any company charging upfront fees to negotiate with your servicer for you. Legitimate counseling for borrowers facing foreclosure or delinquency is always free.