Posted on: 30th Mar, 2008 07:46pm
If you're delinquent on your mortgage, or if you're in financial hardship which may affect on-time payments, mortgage modification may be worth considering. Loan modification is what borrowers look for when they are facing a long term reduction in income and fail to keep up with their loan payments.
Mortgage modification may include any of the following:
Mortgage modification may include any of the following:
- Reducing your mortgage rate
- Extending the loan term
- Adding missed payments and/or extending the loan term
Mortgage modification risks
If your loan modification program adds missed payments into the loan in order to bring your payments up to date, the mortgage balance will increase. Also, you'll have to pay legal fees which are added to the loan balance. So, your monthly payments are likely to go up depending upon how much you've saved to cover the back payments.
However, the monthly payments can be reduced if the lender agrees to extend the loan term. This is quite common in case of a fixed rate mortgage where the investor to whom your mortgage is sold off will not allow the lender for a rate reduction. But if you're current on the loan and need relief from an ARM, your monthly payments won't be raised. Rather, the mortgage rate will be reset for 5 years (approx.) to the original rate. However, if you are delinquent on an ARM, the interest rate will be reset but depending upon how much you're delinquent, your payments may still go up.
A loan modification program helps modify your mortgage note and avoid foreclosure but does not cancel the note. In case the existing note is cancelled and replaced by a new one, it becomes a mortgage refinance.
However, the monthly payments can be reduced if the lender agrees to extend the loan term. This is quite common in case of a fixed rate mortgage where the investor to whom your mortgage is sold off will not allow the lender for a rate reduction. But if you're current on the loan and need relief from an ARM, your monthly payments won't be raised. Rather, the mortgage rate will be reset for 5 years (approx.) to the original rate. However, if you are delinquent on an ARM, the interest rate will be reset but depending upon how much you're delinquent, your payments may still go up.
A loan modification program helps modify your mortgage note and avoid foreclosure but does not cancel the note. In case the existing note is cancelled and replaced by a new one, it becomes a mortgage refinance.
We currently have 2 mortgages which we are having trouble paying. Our lender has suggested we modify the loan because we are in a high interest only mortgage. Are there risks we should look for? Should we seek counsel? Our original loan officer lied on our financial paperwork and we should have never been qualified for this type of loan. We only purchased with an interest only loan to give us time to sell the house we were living in prior to purchasing this home. That house is still on the market and doesn't look like it will sell anytime soon. Any advise will be helpful.
Hi overwelmed,
Loan modification is not considered as a refinance. The lender will offer you a loan modification when you're facing financial hardship and you're unable to pay off the mortgage payments. Refinance, on the other hand, is taking out a new loan to pay off the existing loan.
In CA, if you go for a foreclosure, the lender won't come after you in order to recover the deficient balance resulting from the sale of the property.
Thanks
Loan modification is not considered as a refinance. The lender will offer you a loan modification when you're facing financial hardship and you're unable to pay off the mortgage payments. Refinance, on the other hand, is taking out a new loan to pay off the existing loan.
In CA, if you go for a foreclosure, the lender won't come after you in order to recover the deficient balance resulting from the sale of the property.
Thanks