How To Create a Forbearance Agreement

Standardized Legal Documents How To Create a Forbearance Agreement

Do You Need a Forbearance Agreement? Here’s What You Should Know

Life is unexpected and full of uncertainties—events like the Global Financial Crisis of 2008 and the COVID-19 pandemic have made that clear. When a global or personal crisis causes you to lose your job and experience financial hardship, it can lead to other problems, like being unable to pay your mortgage.

This article will explore a mortgage forbearance agreement as one of the most viable solutions for dealing with late mortgage payments.

What Is a Forbearance Agreement, and How Does It Work?

In special circumstances, banks and clients can come to an agreement about late mortgage payments. The agreement is made if a client has valid proof of financial difficulties that caused them to be late with mortgage payments.


According to its definition, a forbearance agreement is a legal agreement made between the mortgage lender and the borrower. In this legal document, the lender agrees not to exercise their right to initiate foreclosure proceedings against the borrower.

The forbearance agreement is a temporary financial relief—the borrower is obligated to make up for the payment deficits sometime in the future.

What Do You Need for a Mortgage Forbearance Agreement?

Mortgage forbearance agreements are not automatically available to everyone. Every mortgage lender has specific rules and requirements. Usually, the requirements include:

  • Proof of financial hardship
  • Evidence that financial hardship is temporary
  • Guarantee that the borrower will be able to continue payments regularly
  • Assurance that the borrower will repay all missed payments and interest at the end of the forbearance period

If you don’t qualify for a forbearance, you should consider some other options if you want to avoid foreclosure:

  • Debt settlement
  • Loan modification
  • Loan refinancing plan
  • Debt management programs
  • Forfeiting the property to the lender

Alternatives to the Mortgage Forbearance Agreement

If you know that you won’t be able to make a mortgage payment, you should consider every other available option to keep your property. In the following table, you can see the differences between a forbearance agreement and other options:

Option for Avoiding Foreclosure How Does It Work?

Forbearance agreement

The lender agrees to reduce or suspend the borrowers’ payments for a set amount of time

Loan modification

The loan owner changes the terms in the existing loan. Changes may include a reduction of the interest rate, an extension of the repayment time, a different type of loan, or a combination of these options

Repayment plan

The lender temporarily increases the monthly payments to compensate for the unpaid mortgages so that the borrower can catch up on the loan

Can I Create a Forbearance Agreement on My Own?

Yes, you can. There are various forbearance agreement templates available on the internet. Most of these templates are free, but they’re not the most reliable. If you need a valid contract template or want to learn how to write a contract, DoNotPay is happy to help!

What Happens After the Forbearance Agreement Ends?

Forbearance is a temporary financial relief that cannot last more than 12 months. By that time, you should be able to continue with regular mortgage payments. You are also obligated to cover the delinquent payments.

Usually 30 days before the forbearance period ends, you and your servicer get to discuss the agreement and assess the situation. You can work out an option for you to repay the previous mortgage payments without disrupting your finances too much.

The mortgage lender should never ask you to repay your previous mortgages at once.

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