11 questions to ask your lender when deferring mortgage payments during the coronavirus
- Asking your lender about the mortgage deferral process can help you understand what you're getting into — and maybe even decide whether you want to enroll.
- You should ask about the basics, including the dates of your deferral period, interest rates, and late fees.
- Ask how deferral could impact your credit score, property taxes, and homeowners insurance.
- If possible, get the terms of your deferral in writing and jot down your ticket number and the customer service agent's name so you can dispute any issues that may come up later.
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As millions of Americans lose work due to the coronavirus, mortgage lenders are stepping up and offering assistance. You may be able to defer mortgage payments so that you don't lose your home if you can't pay right now.
There are no hard and fast rules about how lenders should handle mortgage deferrals — so when you set up your deferral, be sure to ask questions about how the process will play out.
If you're on the fence about deferring, the answers to these questions could help you decide whether it's the right move for you. If you know you need to defer payments to make ends meet, asking these questions will help you know what to expect.
11 questions to ask your lender when deferring mortgage payments during the coronavirus
1. Do I qualify for deferment?
First things first: Is deferment even an option?
Some lenders will ask for proof of economic hardship, including pay stubs or a letter from your employer. Others will accept your application without asking follow-up questions.
2. How long will my deferment period last?
If you have a government-backed loan through Freddie Mac, Fannie Mae, FHA, USDA, or VA, you should be able to request up to 180 days of forbearance — and then ask for another 180-day extension if you're still financially struggling after your initial deferral period.
If you don't have a government-backed mortgage, you'll have to adhere to the lender's policy about deferral period lengths. Be sure to ask how long deferral lasts and whether the company considers extensions if you still can't make payments when your deferral ends.
3. What are the exact dates of my deferral period?
You may know your mortgage is deferred for three months, 120 days, or 180 days — but what are the exact dates? When will you have to make your next payment?
Write these dates down so you don't misunderstand and miss a payment later, only to be slammed with a late fee. Also, if you find out the deferral period is retroactive, you may be able to receive a refund for your most recent payment.
4. Will deferring hurt my credit score?
Many lenders have issued statements saying they won't report forbearance, missed payments, or late payments to credit bureaus so your credit score can stay in tact. But considering your credit score holds a lot of borrowing and buying power, it's good to double-check before you enroll in forbearance.
5. Will I be charged late fees?
Few lenders are penalizing people with late fees during the pandemic, but double-check to be sure.
6. Will interest continue to accrue?
Even though lenders are pausing mortgage payments, it's rare for them to suspend interest on your loan. Ask whether interest will continue to build and discuss how that could practically affect your loan.
7. When and how do I have to pay back the deferred amount?
The repayment process is probably the most confusing aspect of enrolling in mortgage deferral during the coronavirus pandemic. Some lenders offer just one repayment option, while others provide multiple choices. Here are the most common methods:
- Repay the deferred amount in one lump sum once your deferral period ends.
- Tack the missed payments onto the end of your loan term. For example, if you defer payments for three months, your loan term switches from 30 years to 30 years and three months.
- Spread the deferred amount across the life of your mortgage so that your monthly payment increases.
If your mortgage is backed by Freddie Mac or Fannie Mae, you can request a specific repayment method beginning July 1, 2020: Make one lump sum payment when your mortgage term ends. This means you pay the total deferred amount when you sell or refinance your home, or when you pay off the home completely.
8. Will deferral hurt my chances of getting financing in the near future?
Even during the pandemic, deferral is often a sign of economic hardship. As a result, many lenders won't offer additional home financing if you enroll in deferral — at least not until you prove yourself to be a responsible borrower again, which could take months.
This means you could struggle to refinance or buy another home in the next year or so.
There's no concrete rule about lending after deferral during the coronavirus outbreak, so it's possible your lender will make an exception. Don't be afraid to ask upfront.
9. How will deferral affect my taxes and insurance?
Some people pay their property taxes and insurance separately from their mortgages, while others bundle it all into one payment. Ask your lender if you still have to pay taxes and insurance while your mortgage is in deferral, or if you can pause all these expenses.
10. Can I get this agreement in writing?
Customer service agents are human — it's possible they'll tell you incorrect information.
Maybe your lender says it won't report deferral to credit bureaus, but you see it pop up on your credit report and your score plummets. Or you get hit with a late fee even after a customer support representative said there wouldn't be any penalties.
In these cases, having an email or letter with the terms of your deferral can help you dispute issues.
11. Can I have your name and/or my ticket number?
If you face penalties or your credit score is docked even though the customer service agent said there wouldn't be a problem, having their name on hand could give your argument more validity.
Many customer service departments assign emails and chat sessions "ticket numbers," so knowing yours can help you resolve a problem more quickly later.
- Read more on managing your money in this tumultuous time:
- 3 options for people struggling to pay their mortgage during the global health crisis
- 4 reasons to get disability insurance, even if you don't think you need it
- If you've been financially impacted by the coronavirus, you may be able to pause payments on these 8 bills
- How to get a stimulus check from the US government, which could pay up to $1,200 if you qualify
- In response to the coronavirus, credit card issuers like Amex and Capital One are letting customers skip payments without interest and more