Home Loan Modification 101


Modifying a mortgage denotes changing the terms and conditions originally agreed upon by the borrower and the lender. Akin to mortgage refinance, it is mainly intended to make payment of installments handier for borrowers, especially during times of financial strains.

Borrowers can select from several mortgage modification plans. Among these is interest rate reduction. Instead of having a floating rate, borrowers may request for a fixed rate. Another modification scheme involves the reduction of the principal amount. Increasing the time for repaying the loan is also another option. In addition, trimming down late fees or other penalties are offered in the plan. There are also cases wherein the lender agrees to forgo part of the balance of the borrower. It is wise for the borrower to carefully go over these choices in order to arrive at a sound modification plan that best suits his or her financial situation.

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Typically, any borrower current, late, in default, in bankruptcy, or on the brink of foreclosure is eligible to apply for a mortgage modification. However, the scheme prioritizes homeowners with financial struggles. Such financial struggles must not be in the light of the borrower's irresponsible use of money; instead, it should be due to hardships such as unemployment, salary reduction, loss of a family member, divorce/separation, medical expenses, and the like. Moreover, the borrower must prove that he or she will keep up with the modified plan and not default again. Thus, it is important to provide accurate and complete financial statements that signify the borrower's ability to stick to the new repayment scheme.

The borrower ought to take the initiative in applying for loan modifications. This can be done by personally contacting the lender in order to discuss options and to gain other valuable information. Note that the key to acquiring the modification plan is by showing responsibility. This will leave the lender with the impression that loan modification and not foreclosure is the most suitable option for the borrower. Loan modifications offer borrowers a surefire way to get ahead of their financial hardships.


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