There are many situations where a homeowner may have difficulty in making mortgage payments. This can be because of economic hardships such as loss of a job, medical bills, legal actions or even through divorce or separation. When this occurs the mortgage holder has options as to how to handle the breach of the terms of the mortgage. In many cases the lender is willing to work the homeowner if they can bring the mortgage current or if a modified loan arrangement can be negotiated. Without any intervention or agreement the next move by the lender is typically foreclosure.
What Does Loan Modification Accomplish?
Loan modification does help out the homeowner as it will reduce further payments by a specified and pre-determined amount. The lowering of the payments occurs because the interest rate is decreased during the modification. The principle of the loan, the actually amount borrowed to purchase the property or home, is not usually decreased.
Since the lender will be receiving a lower interest rate loan extensions are also offered in loan modifications. This means that the borrower now has longer, usually a few years longer, to pay off the mortgage. However, keep in mind that the longer terms of the loan do mean more interest paid over the term of the loan, even if it is at a lower rate than the original interest rate.
Making a Mortgage Current
Bringing mortgage payments current initially sounds like a great option, and it may be for some homeowners. Most people will have to borrow to get the lump sum amount to cover all missed payments or partial payments made. This money will have an interest rate attached to it, often a rate that is higher than the rate of interest on a modified mortgage or even the original loan. These higher interest rates can make keeping the loan payments and the future mortgage payments current a financial nightmare.
Getting Legal Support
An attorney that is familiar with negotiating either bringing a mortgage current or entering into a loan modification is essential in these types of agreements. Without a qualified attorney to represent your position you may not get the best interest rates and modifications possible and may not realize that you are leaving money on the table. Speaking with an attorney prior to any discussions with the mortgage holder is highly recommended to protect your financial options moving forward.
