3 Reasons to Choose Loan Modification over Foreclosure

If you are considering a loan modification, a foreclosure is most likely in the back of your mind as well. Anytime you are in bad enough shape with your mortgage to qualify for a loan modification, foreclosure is another process that is looming in the background. While it might be closer than you would like, loan modification is still your better option. Many people might be thinking of just giving up and allowing the bank to foreclose on their homes. However, you should refrain from doing this at all costs. Here are a few reasons to consider choosing loan modification over foreclosure.

1. Keep Your House

The biggest reason to do a loan modification instead of allowing the bank to foreclose is that you get to keep your house. You do not have to subject yourself to the humiliation that comes with losing your home and you can stay right where you are. In most cases, you have lived in your home for a number of years and it is where your family calls home. You may not be ready to leave the house that you have made a home. When you leave your house, you want it to be on your terms and no one else's. Therefore, loan modification would be your superior option because you will not have to give up your home. 

2. Help Your Credit

Going through with a foreclosure can have a devastating effect on your credit. With a foreclosure on your record, you would not be able to buy a house again for several years. In most cases, the foreclosure will be on your record for at least seven years. This means that you will be forced to rent a home for much longer than you might desire. 

Loan modification will also have a negative effect on your credit. However, the damage will not be as bad as if you went through a full-blown foreclosure on your home. Choosing the lesser of the two evils is definitely the best choice as far as your credit file is concerned. When your credit is ruined it becomes difficult to buy the things that you want to buy. You will pay higher interest than everyone else if you are even approved for a loan. It is much easier on you in the long run if you just modify your existing loan.

3. Cheaper Payment

When the bank agrees to modify their loan with you, it is because you have not had an easy time with the current payment. Most of the time, you have fallen behind by a few months and you cannot afford the payment. Maybe you lost your job or had to take a pay cut. Regardless of the reason behind it, you can no longer afford your current payment. 

The bank understands this and may be willing to decrease your monthly payment and interest rate in order to keep you in your house. You will still get to keep the house, but you may be able to have a monthly payment that is lower than it once was.