Loan modifications are a long-term financial relief option for homeowners who can’t make their mortgage payments. If approved by your lender, this option can help you avoid foreclosure by lowering your interest rate or changing the structure of your overall loan.
What is a loan modification?
A loan modification involves changing your existing mortgage so it’s easier for you to keep up with your payments. These changes can include a new interest rate or a different repayment schedule. It likely won’t reduce the amount you owe on the balance of your mortgage.
Lenders allow borrowers to modify loans because default and foreclosure are more costly to their business. In other words, they don’t want the house, but they do want the loan repaid. A modification helps accomplish both goals.
“A loan modification entails changes made to the terms of the loan itself — usually reducing the interest rate or extending the length of the loan,” says Rick Sharga, president and CEO of CJ Patrick Company, a real estate consulting firm in Trabuco Canyon, California. “This allows you to lower your monthly mortgage payment and, ultimately, prevent default and foreclosure.”
How does a mortgage modification work?
The goal of modifying a mortgage is to reduce your monthly payments to an affordable level, helping you stay up to date on the loan and in your home. The modification options might include one or a combination of these:
For more information about loan modifications visit the Scoop Blog
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