Call Your Mortgage Company
If you have a mortgage, you may be surprised to find that, even if your home is lost, you’re still responsible for your monthly payments.
*This information has been checked for accuracy and non-bias by licensed professionals, experts and representatives from National 501c3’s. Consult with a licensed professional about your specific situation.Think of it like this:
It’s like if a friend lent you $20 to buy a toaster. If the toaster breaks in a week, you still owe your friend the $20, because the loan was for the money, not the toaster. A mortgage works the same way - the bank lent you money, and even if the house is gone, you still owe the loan. That’s why insurance is so important.
The house was just the “backup guarantee” (collateral) in case you stopped paying. Since the money was real and you already received it, the debt doesn’t disappear just because the house did.
Some lenders may be understanding and offer flexible payment options after a disaster, but here’s what you should know about the options you may be presented with.
*This is not professional financial advice. You should speak to your CPA or financial advisor for guidance related to your specific situation.
DEFERMENT
Deferment means you can temporarily stop paying your loan without being considered late or going into default/foreclosure.
How it works:
Overall impact on your financial life:
Like hitting a “pause” button without penalties: it doesn’t hurt your credit, and you don’t have to pay fees, but you still owe this money and possibly the interest on it. This will be added to your total loan amount.
“When you restart, your payments may be slightly higher to account for the added interest, and lenders can see it on your credit report and may treat you as a higher risk for applying for new loans.”
- Andrew Avina, Disaster Financial Expert, Operation Hope
what IS
FORBEARANCE?
A temporary pause on your payments that is reported to credit bureaus but does not impact your credit score. Not considered late payments. Depending on your lender, interest may still accrue and be added to your balance.
How it works:
Like telling your lender, “I can’t afford to make my full payments right now,” so they agree to let you pause or pay less for a while, but you will still owe the full amount later, with added interest.
Overall impact on your financial life:
Does not affect your credit score, but means you likely can’t get any other loans for 12 months after you lift the forbearance, because it is reported on your credit report.
When you speak to your lender, ask whether deferment is available. Write down everything they offer you and then discuss with a professional before making any decisions.