When should you consider a Loan Modification?


Besides the attractive interest rates on the current mortgage market, banks are also offering new incentives such as the New Homeowner Stimulus Programs which allow Home Loan Modifications for homeowners with existing mortgages. This presents you with opportunities to get into a better home loan arrangement.

If one of the following scenarios describes your situation, applying for a home loan modification will be a good move for you.

Scenario One

Unexpected circumstances have caused hardship in your financial situation. You want to save your home from foreclosure or a short sale. If you can get into a different payment program which will defer your payment for a short period of time and lower your interest cost on the remaining balance of the mortgage, then a loan modification is definitely worth consideration. In many cases, your expected mortgage payment will not exceed 31% of your monthly gross income, and the late fees and penalties will be waived. Consult a reputable agent who knows the Standard Waterfall Guidelines for more details.

Scenario Two

You should apply for loan modification if you have a bad or toxic mortgage on your home, especially if the home loan you have is based on negative amortization. This means that the amount of balance you owe will increase with time since your monthly payment falls below the true interest amount due. Through the Home Loan Modification program, you can convert your present loan to a safer, fixed-rate conventional home loan that ensures that the principal on your mortgage will decrease over time and be paid off at the end of the loan term.

Scenario Three

There is a change of your income level due to retirement or employment status. You may wish to access part of the home equity accrued during past years of ownership. You may wish to improve your cash flow. Now is your chance to modify your home loan to a longer term, especially when you are offered a good interest rate for a longer term loan. Some loans can even be extended beyond 30 years. You always have the option of paying more into the principal when you wish.

In all of the above scenarios, a critical part of the decision is to seek help from a reputable agent who is knowledgeable and honest. Many people have fallen into traps when they place their trust in a questionable agent or broker. A good agent will seize the good opportunities for his/her clients without rushing them into transactions they do not feel comfortable with.

Original article by Spring Stillman.

To see how a Loan Modification program could be right for you, visit us online.

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