Mortgage loan modification is a simple yet effective solution if you had taken a mortgage to buy a new home, but unfortunately your finances are now in disarray. It is a procedure by which the lender can modify the terms and conditions of the mortgage. It is generally used when the borrower is not in a position to adhere to the original terms agreed with the lender, but it can also be used to get rid of your mortgage in lesser time by making higher payments.
Some of the common modifications that can be made to your mortgage agreement are:
Mortgage loan modification can save you from facing foreclosure, which is inescapable if you do not keep up with your mortgage payments. You may request your lender to change the terms, like reducing the size of monthly payments to align it with the change in your income, which in turn would also mean an extension of the total repayment period.
If you’re lucky, your mortgage lender may even allow you to suspend payments for some time. Such a measure is aimed at giving you time to get out of your financial difficulties and the payments are resumed at an agreed date later. Once you start paying the lender again you may ask for an extension of the repayment period or make larger repayments so that the mortgage can be brought back on schedule.
Mortgage loan modification also allows you to protect your credit record. If you fall behind your mortgage payments, and choose to ignore the problem, your credit score will suffer. This means the next time you want a loan, you will have to pay a higher interest rate, and many lenders might even refuse to give you a loan. By being proactive, and seeking a modification in the terms before you miss a payment, you can keep your credit history clean.
Many people are hesitant in approaching a lender for mortgage loan modification, but you should remember that it would be a much more embarrassing situation if you miss your payments and face foreclosure.
You can take assistance from a financial counselor, who can advise you on the changes that you should seek in the mortgage agreement to have a realistic chance of the lender agreeing to the modification. You can then submit this information to the lender and request modification in the terms.
Most lenders would rather have a modification than a foreclosure, which is an expensive process for them. However, not all lenders will immediately agree to a mortgage loan modification, and you will have to convince them through credible evidence that you will be able to adhere to the modified terms.