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During this challenging time of dealing with the COVID-19 health crisis, homeowners across the nation are hitting the pause button on their mortgage payments.

Millions of Americans are taking advantage of the flexibility of a financial reprieve through a mortgage forbearance.

The economic fallout from the health emergency leaves many with narrowing options. A mortgage forbearance is one of the many available financial programs for consumers who are encountering financial difficulties.

If you are considering a mortgage loan forbearance program, here are some things to know about how it works.

Forbearance under the CARES Act
The federal government’s response in aid relief has been far-reaching, assisting small business, banks, homeowners and everyday consumers.

As part of the relief, a trillion-dollar package was passed with homeowners in mind.

Borrowers facing hardships can apply for up to a one-year reprieve from government-backed mortgages, which make up about a third of all loans.

Homeowners should ask their lender about repayment guidelines.

No additional interest
Borrowers will not pay extra interest on their mortgage in forbearance. The interest rate will go unchanged, but it will accrue in accordance to the borrower’s contract.

Under the CARES Act, no interest accrues during the agreed upon forbearance period beyond that which has already been scheduled.

Credit score impact
Taking on a mortgage forbearance program may not tarnish your credit record. However, it is important to check your credit score regularly and check with your lender to confirm these terms.

Private mortgage conversion
Since federal relief programs target loans backed by Fannie Mae or Freddie Mac, those with a privately held mortgage may wonder if they can switch to a government-backed loan.

A mortgage refinance is one method to convert a loan.

However, some obstacles may get in the way if the loan is already in forbearance.

Refinancing after forbearance
Once the forbearance period ends, a borrower can consider a mortgage refinance. This is possible once the forbearance amount is paid off either through full payment or a new mortgage.

Keep in mind, any mortgage payment tacked onto the back of the loan will be considered as part of the principal amount owed. The refinanced loan will capture these payments in calculating the new loan amount and terms.