Understanding Partial Claim Mortgage – Benefits, Process & Eligibility

What Is a Partial Claim Mortgage?

A partial claim mortgage is a type of mortgage relief option offered mainly to homeowners with FHA-insured loans who are struggling to make their mortgage payments due to financial hardship. It allows you to bring your mortgage current without paying the overdue amount immediately. Instead, the lender takes the missed payments and turns them into a separate interest-free loan secured by your property.

This option is often used after events such as loss of income, medical emergencies, or national crises like the COVID-19 pandemic. The U.S. Department of Housing and Urban Development (HUD) manages this program through the Federal Housing Administration (FHA).

Unlike refinancing or restructuring the entire mortgage, a partial claim focuses only on the overdue amount, helping you resume regular payments without changing your original loan terms.

How This Mortgage Relief Option Works

Here’s a step-by-step look at how a partial claim mortgage works:

1. Identify eligibility – Only borrowers with FHA-insured loans qualify for an FHA partial claim.
   
2. Determine arrears – The lender calculates the total missed payments, including principal, interest, taxes, and insurance.
   
3. HUD’s payment – HUD provides the funds to cover the overdue balance directly to your lender.
   
4. New interest-free loan – You agree to repay HUD in the future through a subordinate mortgage or lien on your property.
   
5. Repayment time – You don’t make monthly payments on this amount; it’s due only when you sell the home, refinance, or fully repay the primary mortgage.
   

This system helps prevent foreclosure while keeping your original mortgage terms intact.

Eligibility Requirements for an FHA Partial Claim

To qualify for a partial claim mortgage, you need to meet specific requirements set by HUD:

• Loan type – You must have an FHA-insured mortgage.
  
• Financial hardship proof – Documentation such as job loss records, medical bills, or other proof of income reduction is required.
  
• Loan status – Usually, you must be at least 4 months behind but not more than 12 months behind on payments.
  
• Occupancy – The home must be your primary residence.
  
• Ability to resume payments – You must be able to make your regular monthly mortgage payments after the partial claim is applied.
  

Your mortgage servicer will review your financial situation, verify the arrears, and confirm that a partial claim is the most suitable solution for your case.

Benefits of a Partial Claim Mortgage

Opting for a partial claim mortgage has several advantages:

1. Avoids foreclosure – You can keep your home and prevent damaging your credit with a foreclosure record.
   
2. No immediate repayment – The new loan from HUD is interest-free and requires no monthly payments.
   
3. Keeps your current mortgage terms – Your interest rate and monthly payment on your primary mortgage remain unchanged.
   
4. Fast process – Compared to refinancing, a partial claim can be completed relatively quickly.
   
5. Government-backed security – Since it’s an FHA program, you’re working with a regulated and trusted system.
   

Drawbacks to Consider Before Taking a Partial Claim

While a partial claim mortgage can be a lifesaver, it’s important to be aware of the downsides:

• Future repayment obligation – The amount HUD covers will have to be paid when you sell, refinance, or pay off your main mortgage.
  
• Limited to FHA loans – If you have a conventional loan, you’ll need to explore other mortgage relief options.
  
• Increased total debt – Even though it’s interest-free, it’s still an additional lien on your property.
  
• Eligibility restrictions – Not every borrower in financial trouble will qualify; strict rules apply.
  

Step-by-Step Guide to Applying for a Partial Claim Mortgage

Here’s a simplified process to apply for a partial claim mortgage:

1. Contact your loan servicer – Notify them of your financial difficulties and request a loss mitigation review.
   
2. Submit documentation – This may include proof of income, bank statements, tax returns, and hardship letters.
   
3. Servicer review – They will check your eligibility and calculate the amount needed to bring your loan current.
   
4. HUD approval – If approved, HUD will send the funds to your lender.
   
5. Sign the promissory note – This formalises your agreement to repay the HUD loan in the future.
   
6. Lien recording – The new subordinate lien is recorded with your local county records.
   
7. Resume regular payments – Once the arrears are cleared, you go back to paying your regular monthly mortgage amount.
   

Partial Claim Mortgage vs. Other Loan Assistance Programs

When exploring mortgage relief, it’s useful to compare the partial claim mortgage to other options:

The partial claim mortgage is ideal if you just need help catching up without altering your current loan terms.

Tips Before You Apply

• Act quickly – The longer you wait, the more arrears build up, making it harder to qualify.
  
• Understand repayment terms – Know exactly when and how you’ll need to repay the partial claim amount.
  
• Check alternatives – Sometimes a loan modification or refinance may work better for your long-term goals.
  
• Get professional advice – Housing counselors approved by HUD can guide you for free.

Loan Market – Your Partner in Financial Solutions

While a partial claim mortgage is a helpful tool for U.S. FHA borrowers, Loan Market offers a range of financial services in the UAE to help you achieve your goals and manage your finances effectively. Whether you’re buying a home, expanding your business, or financing a vehicle, we provide tailored loan solutions to meet your needs.

Our services include:

• Apply for Home Loan – Find the best mortgage deals to purchase your dream home.
  
• Business Loan in UAE – Get the right funding to start, grow, or stabilise your business.
  
• Apply Personal Loan in UAE – Access quick personal financing with flexible repayment options.
  
• Car Loan in UAE – Secure competitive rates to finance your next vehicle purchase.

With expert guidance and a customer-first approach, Loan Market ensures you get the right financial solution for your unique situation.

Conclusion

A partial claim mortgage is a powerful tool for FHA loan borrowers facing temporary financial hardship. It helps you avoid foreclosure, catch up on missed payments, and maintain your current mortgage terms — all without the burden of immediate repayment. However, it’s not a free pass; the amount will eventually need to be repaid when your mortgage is closed out.

If you’re struggling with payments, reach out to your mortgage servicer or a HUD-approved housing counselor to explore whether this mortgage relief option is right for you. Acting early can make the difference between keeping your home and facing foreclosure.