Most New Jersey banks and lenders would tell you that mortgage and loan repayments for housing can be long and tough processes. This is mainly because it takes a lot of money and time to repay them in full. And during this time, NJ homeowners can go through several types of problems that in some cases can make them delinquent borrowers. This means that they might default on their mortgage or loan repayments.

Although in many circumstances, delinquent borrowers in New Jersey may face foreclosure, there are also some ways that can help them avoid it. And one of the best ways of doing so is by getting a mortgage forbearance. In this article, we will take a closer look at what a mortgage forbearance is and how it can help you if you are a homeowner in NJ.

What is a Mortgage Forbearance?

The main idea behind a mortgage forbearance is to prevent a foreclosure from taking place. It is a formal binding agreement between a mortgage lender and delinquent NJ borrower that provides the latter with some room to manage their payments. Through a mortgage forbearance, a borrower can either be offered to delay their payments or pay a lesser amount as agreed upon by the lender.

In many cases, New Jersey homeowners can also avoid paying their mortgages for a stipulated period of time. And during this time, the lender formally agrees to not proceed with a foreclosure on the mortgaged property. In some cases, a lender may even agree to extend this pre-determind grace period.

Remember – Although a mortgage forbearance can delay foreclosure in New Jersey or even prevent it from happening, it should not be taken or seen as a permanent solution. But, in most cases, it is one of the best solutions to avoid foreclosure in the short term.

COVID-19 and Mortgage Forbearance

The US government’s legislation associated with the COVID-19 crisis offers special mortgage forbearance options to NJ homeowners. But this relief package can only be availed by those with federally-backed mortgages. COVID-19 mortgage forbearance agreements can provide payment extensions from anywhere between 3 to 18 months – depending on eligibility and requirement.

The eligibility for COVID-19 mortgage forbearance is contingent on certain factors. Two of the main factors are if you have a federally-backed mortgage or if you have been directly or indirectly affected by the pandemic. Unfortunately, the deadline for HUD/FHA, USDA, or VA loans was passed on 30th September 2021. But the good news is that there is currently no mentioned deadline for mortgages backed by Fannie Mae or Freddie Mac.

Does a Mortgage Forbearance Affect Your Credit?

A mortgage forbearance may or may not affect your credit scores, and this mostly depends on your lender reporting your forbearance to the concerned authorities and how they do it. It is important to note that one should honor and keep track of all the points and terms mentioned in their forbearance agreement. Failing to maintain (written) notes and records or not complying with some of the terms could go on to hurt one’s credit in the future.

However, in most cases, New Jersey lenders do not report a forbearance, especially negatively. This means that most mortgage forbearance agreements do not go on to affect one’s credit scores. But at the same time, it is imperative to keep in close contact with one’s lender. Finally, it’s always a good idea to keep a check on one’s credit scores, reports, and all the ways that can affect or improve them.

Mortgage Forbearance – Pros & Cons

Here are some of the main mortgage forbearance pros and cons –

Mortgage Forbearance Pros

  • It’s way less damaging to your credit score than a foreclosure.
  • You get to avoid, pause, or postpone foreclosure and continue living in your home.
  • It gives you time to reassess and rebuild your finances.
  • It enables you to reduce or temporarily suspend your monthly mortgage payments.
  • After the forbearance period is complete, you can also look for a loan modification that alters the terms of your mortgage.
  • In almost all cases, NJ borrowers don’t have to pay any additional interest on their mortgage during a forbearance.

Mortgage Forbearance Cons

  • The missed or reduced amounts still need to be paid – either in a lump sum or in installments as decided in the mortgage forbearance agreement.
  • The amount to be paid could be heavier than it was before.
  • The overall time spent repaying the mortgage or loan increases.
  • Even though payments may be reduced or suspended for a while, the initial interest rates continue to apply to the mortgage.

The Bottom Line

Yes, a mortgage forbearance can definitely help New Jersey homeowners keep their homes. However, you should always be aware to learn the whole mortgage forbearance process and all the terms associated with it carefully. Learning the process thoroughly can save you from losing your home to delayed or missed payments and foreclosures. All NJ mortgage borrowers are always advised to not only evaluate and discuss the terms of the mortgage agreement with their lenders but also learn all the rules and regulations involved in the process.