The most common notion when it comes to reducing the interest rates on one’s mortgage is to refinance. What many don’t know is that you can actually achieve the same results even without restarting your mortgage clock.
This is done via a process called Mortgage Modification.
It is the process of revamping the terms of your original mortgage and making a new agreement. Modifications can be done by changing the interest rates so that the resulting arrangement is a lowered monthly home loan payment, or if you have been delinquent in the past few months, re-amortize the mortgage to cover the unpaid cost.
A modification does not necessarily result into a portion of the loan forgiven. Some, such as in the case of a re-amortization, can cost you more in the long run.
How does it work?
Many homeowners who opt to have their loans modified are those who have experienced sudden financial challenges, rendering them incapable of carrying the burden of their monthly payments.
If you are in the same boat, you can follow the following steps to having your own mortgage modification.
1.) Enlist the assistance of a housing counselor from the Department of Housing and Urban Development. These professionals offer free advice as to the best way to reduce your mortgage costs.
2.) Speak with your lender and ask for the possibility of loss mitigation. Here, you need to lay out your situation honestly and why you’re having difficulty fulfilling your duty as a payor. Most lenders don’t want to lose their business and would work with their clients to achieve the best possible compromise to the presented circumstances.
3.) Forward all the necessary paperwork to your lender to help hasten the assessment and processing of your request. These may include financial statements that reflect your claim of hardship. Sign and fill in all the required forms and send them back as soon as possible.
Your lenders will assess your application for modification and see if all evidences back up your claim. Then the verdict will determine whether you will have a new agreement or not. If you’ve had a good payment record with no delinquencies or payment delays in the past, you will have a higher chance of getting approved.
One major downside to having a mortgage modified, however, is its impact on your credit score. Lenders interpret a modification as a negative event in your record and may damage your chances of getting other forms of financing in the future.
Some quick tips when getting a modification: ask questions, stay in touch, and be persistent. Be flexible with the types of modifications that might be applicable to your situation, and don’t lose hope in obtaining a positive end.Get Connected Here »