A traditional loan modification is an agreement between you and your mortgage company to change the original terms of your mortgage. For example, a loan modification might allow you to add past due payments to the balance of the loan, lower your monthly payment, lower your interest rate, change your interest rate from a variable rate to a fixed rate, and / or extend the number of years you have to repay your mortgage. Modifying your loan with new, more favorable terms, can save you thousands over the life of your loan. If you are facing a hardship, and you need help, a loan modification might be just the solution you're looking for.
Benefits of a Loan Modification
Modifying your mortgage has several substantial benefits. The main benefits of a loan modification are:
- Avoid Foreclosure. A modification helps you avoid foreclosure and stay in your home by resolving your delinquency and bringing your mortgage current again.
- Lower Mortgage Payment. With a loan modification, you can modify the terms of your original mortgage, often lowering your monthly payment amount, so that your mortgage is more affordable and sustainable.
- Lower Interest Rate. With a loan modification, you can take advantage of today's historically low interest rates, saving yourself thousands over the life of your loan.
- Fixed Interest Rate. If you currently have an adjustable interest rate, a loan modification can give you a fixed interest rate at today's low rates, potentially saving you thousands over the life of your loan.
- Principal Forgiveness. Under a loan modification, your mortgage company may be willing to actually lower the amount you owe on your mortgage to help lower your payments so that you can afford to keep paying your mortgage.
- Rebuild Your Credit. A loan modification is much less damaging to your credit score than a foreclosure and resolves any existing mortgage delinquency so that your credit can start rebuilding immediately.
Eligibility Requirements to Receive a Loan Modification
Requirements for receiving a loan modification vary from lender to lender. In general, you must be experiencing a financial hardship that has caused you, or will soon cause you, to fall behind on your mortgage. Contrary to popular belief, you do not need to already be behind your mortgage to qualify for a loan modification.
You will also be required to fill out an application that will take into account your income, assets, and expenses. The lender will evaluate your application to determine if they are able to offer you a loan modification. If you're not eligible for a loan modification, don't worry, there are other mortgage assistance programs that you may qualify for.