What Is Mortgage Loan Modification?
The term mortgage, or mortgage loan, is familiar to most people–it is the loan you take out from a bank to pay for your home. After all, how many people can afford to pay cash for a house? And, just as most people understand what a mortgage is, most people understand the pressure that comes with a loan of that magnitude. Many homeowners reach for the largest mortgage that they can afford in order to purchase the home of their dreams. And, sometimes it can be hard to keep up with the payments. If your mortgage payments are starting to feel out of reach, you are not alone, and you are not out of options. A mortgage loan modification might be just what you need to keep your home.
Mortgage Loan Modification
But, just what is mortgage loan modification? In short, it is a change to the terms of your loan agreement that you originally made with the bank. For struggling homeowners, it can be a way to make the payments more manageable. This might include lowering the mortgage rates, changing the loan from a variable rate loan to a fixed rate loan, or extending the term of the loan. You can use an online mortgage calculator to get an idea of what your payments would be with a lower mortgage rate or term. While a mortgage loan modification does not change the amount you owe to the bank, it can reduce the monthly payment by changing the mortgage rates or extending the life of the loan. This allows struggling homeowners to keep up with their payments and avoid foreclosure — a win for the bank and for you.
Mortgage loan modification is not the same thing as refinancing a mortgage. When you refinance a loan, you are effectively paying off the original loan and taking out a new loan with a different rate and a different life of the loan. People may choose to refinance if mortgage rates change from when they originally took out the loan or if their income changes and they have different financial parameters. Refinancing is a great option, but it is not typically an option for people having trouble keeping up with their payments.
Who Qualifies for Mortgage Loan Modification?
People who are struggling to make their payments and have a high probability of defaulting on their loans are good candidates for mortgage loan modification. Typically, homeowners must be 60 days or more behind in their payments, or their finances show that they are about to default on the loan. Many times the bank will expect that the homeowner has also incurred a financial hardship that has impacted their ability to repay the loan. Such hardships include losing a job, losing a spouse, or an unexpected medical issue, such as serious illness or disability.
Navigating the Mortgage Loan Modification Process
Banks are willing to work with homeowners to help them stay in their homes. After all, a foreclosure is costly for the bank, too. However, if banks make it too easy for homeowners to restructure their loans, they risk being taken advantage of. The mortgage loan modification process is complex and banks may retain a legal team to prevent homeowners from changing their loan terms. Bartifay Law Offices, P.C. has extensive experience helping homeowners to navigate this process. We can work with you to complete the applications and all the paperwork that comes with it, giving you the best chance of staying in your home with a payment that you can afford. If foreclosure is looming over you like a dark cloud, call us today to learn more about mortgage loan modification.