Loan modifications are now a popular approach for homeowners who are unable to afford mortgage payments. They serve as a solution to short sales, foreclosures, and even refinancing. Because of the present economy and the large rate of foreclosures, creditors want to help you remain in your house, so you don’t have to cope with foreclosures.
Here are four reasons why you should get a loan modification.
You Are in Financial Distress
Financial distress is something unforeseen in your life that makes it impossible to continue paying the mortgage payments you previously were able to. This entails the loss of work, medical condition, disability or sickness, and death in the close family. You will be required to write a letter of hardship explaining your circumstances with the creditor. You may be granted a temporary rate cut, a permanent rate cut, or an extended mortgage period.
You Have a Subprime Mortgage
If you are suffering from bad debt, high chances are your creditor will refinance it. Subprime mortgages are a factor in why loan modifications exist. Too many poor mortgage products have been given to homeowners, and for this reason, the rate of foreclosures is very high. These mortgages have massive defaults, and they intend to tie you with a cheaper mortgage product. These may include adjustable loans, interest-only loans, and select a payment mortgage.
You Have Insufficient Equity
If you borrow more than your property is worth, then modifying your loan might benefit you. Normally, with negative equity, you won’t be allowed to do conventional refinancing. You may get a reduced interest rate, and if you have a flexible rate, your creditor can turn it into a fixed rate.
You’re going to Foreclose
If you are about to foreclose, you should consider modifying your loan. Creditors don’t wish to see you foreclose, and they may be prepared to reach an agreement with you. You will have to justify how modifying your loan will prevent you from foreclosure both presently and in the future.
Maybe you lost your work, and the temporary rate cut will enable you to afford the mortgage payments while searching for new work. Or perhaps you have a lasting handicap, and a permanent rate cut will enable you to continue paying your mortgage with your new fixed earnings.
If you have already fallen behind or are striving to meet your monthly loan payments, you might be in danger of losing your house. However, depending on your situation, you may qualify for a mortgage modification, enabling you to continue making mortgage payments and preventing foreclosure.