4 Signs that You Should Modify Your Home Loan
Millions of homeowners across the country are in a stressful situation with their mortgages. In particular, they are unable to make their mortgage payments because of financial hardships.
Although the financial hardships vary from one homeowner to the next, the result is the same: homeowners are struggling to make their mortgage payments to avoid foreclosure. As a result, many homeowners are turning to home loan modification to adjust the existing terms of their home loans.
Loan Modification vs. Mortgage Refinance
A home loan modification is not a refinance, and it is not a new loan. It is simply a deal that is created between you and your lender to modify your loan’s terms into a more manageable agreement. A home loan modification may adjust the terms of your home loan either permanently or temporarily, and it may include an interest rate decrease, an extended loan term or a temporary deferment of your loan payments. Your home loan modification may also be a combination of these three things.
A home loan modification is typically undertaken by the homeowner who is experiencing financial hardship. A lender is likely to agree to modify a home loan because the alternative may simply be that the homeowner is unable to keep up with their home loan payments.
In other words, negotiating a home loan modification with your bank not only benefits you, but the bank as well.
Why You May Want to Consider a Home Loan Modification
There are a number of reasons in which a lender may agree to a loan modification. These are also the same reasons that you should consider a home loan modification:
- You have received a foreclosure notice from your bank. It is important to realize that a home loan modification can still take place, even if you are near foreclosure. Lenders will almost always be willing to modify your home loan because the foreclosure is both expensive and time consuming for them. The bottom line is that a home loan modification will cost the bank less in the long run.
- Your adjustable rate has changed, and you are unable to afford your new payments. If your home loan interest rate has changed and you are unable to make your new mortgage payments, you may qualify for home loan modification. If you are able to address the issue before it gets out of hand, you may have more room for negotiation with your lender.
- You are falling behind on your mortgage payments. If you have attempted to make your monthly mortgage payments only to fall behind, then it is best to contact your lender and discuss the possibility of home loan modification. Your financial status will not likely change in time to handle your home loan payments, but you may be able to negotiate the terms with your financial institution.
- You have experienced a financial hardship. Provided you have not filed for bankruptcy and the property in question is your primary residence, you may be able to qualify for a home loan modification through your lender. From the death of a spouse to a loss of a job, financial hardship can mean different things to varying people; it is up to you to recognize when you can no longer meet your home loan obligations and to contact your lender for a possible home loan modification.
Working closely with your bank and staying in contact with your lender are critical to successfully negotiating a home loan modification. By being proactive, you can save your home and your credit. |
