Modifications: Deal or No Deal?

Should I Keep My Home?

Modifications are the new buzz word in foreclosures.  Most people who apply to their bank for assistance want to keep their home.  The real questions is should you keep your home?

Working on a modification is often a long and exhausting process.  If an offer is extended by the mortgage company it may feel like an ultimate victory and you jump on the chance to save your home.  Often the monthly payment will be reduced and the interest rate decreased.

Consider the Big Picture

My advice is to strongly look at the whole picture.  Look at the New Principal Balance, this is the amount you are "financing" under the modified terms.  It is often much more than you originally financed because the payments you have missed (mostly interest) have been put back into your loan.

Is Your "House" Really Worth It?

Would you buy your house today for that new principal balance??? In most cases the answer is no. But many homeowners take the deal because it is not just any house it is your HOME.  Weigh the value of your "home" versus the value of this "house".

If you factor in the amount you are now financing, the length of time you will be paying on it, the rate you will receive under the modification and the total amount paid if only required payments are made DOES THAT EQUAL the value of your "home"?

Take a Moment to Think it Over

I have seen some really great modifications but I have unfortunately seen some really terrible ones as well.  Be very careful before accepting a 30 year financial obligation that might not make the best financial sense.

If you are unsure contact an attorney who is familiar with modifications.  An attorney can help you understand and evaluate the terms of your modification offer.