Paying off a mortgage loan can be tough. Many borrowers live from paycheck to paycheck just to meet all their financial obligations, including a mortgage. A few just give up, think that they can’t afford to keep up with the monthly dues anymore.
Not being able to afford your mortgage can be caused by a variety of reasons. It can be due to stagnant income growth. Another precipitating factor can be the change in lifestyle and spending habit. Unforeseen emergency expenses can also lead to the inability to continue mortgage payments.
Whatever the reason may be, don’t be afraid to talk to your lender about it. The thought of discussing such issue to a lender may be daunting to some borrowers. They think that they will only make things worse. However, it is actually the opposite.
Keeping an open communication with your lender about your struggles to keep up with the mortgage payments may actually do you more good than bad. This shows the lender that you still want to repay the mortgage. After all, it is important to lenders that a borrower pays back their money.
You and your lender can start discussing on how you can better afford your mortgage. Doing so will be a win-win situation. You will be able to keep your house and the lender will still be able to make money from the loan.
Mortgage Loan Modification
One way you can deal with this is through a mortgage loan modification. A lender may consent to a loan modification to help struggling borrowers who can no longer make payments in full and on time.
To lenders, a borrower who is able to continue making payments until the loan is completely repaid is more profitable than trying to look another buyer for a foreclosed home. It saves them not just the resources, but also time.Connect with a lender, click here.
What happens in a loan modification?
It is a special program that lenders design so as to modify the underlying terms of an existing mortgage into one with more favorable terms. This modification has to be agreed by the lender and the borrower. A new contract is drafted which will supersede the original agreement.
During a loan modification, changes may include any or a combination of the following:
- lowering the existing mortgage interest rate
- lengthening out the payment term
- reducing the mortgage’s principal balance
All of which aims to make it easier for borrowers to continue making monthly payments.
Is it the same with refinancing?
No, these are two different products. A loan modification only adjusts the terms of the EXISTING MORTGAGE LOAN but does not replace the loan itself. Most often, it is just for a short period of time to allow the homeowner to get back on their feet.
A refinance is another product where your existing mortgage loan is REPLACED WITH A NEW LOAN. The purpose is to reduce the interest rate, or adjust the terms to it becomes more favorable, or to switch to a fixed rate loan from an adjustable one or a combination of these.
Another difference is that when you refinance, you have the choice to do it with the same lender or have a different one. However, a loan modification does not give you the freedom to choose a new lender.Find the best mortgage rates, click here.
If you are already struggling to pay your monthly mortgage dues, consider a mortgage loan modification. This can be the temporary relief you need so you can reboot your finances.
A loan modification may just the what you need to save your home from foreclosure. Your lender will be more than willing to help you out so you can keep your home. Don’t hesitate to talk it out with them.Click to See the Latest Mortgage Rates»