What is Mortgage Modification?

Mortgage modification is the process of permanently adjusting the terms of your home loan in order to make your payments more affordable.  Mortgage modification allows borrowers to avoid foreclosure and bankruptcy. With mortgage modification you do not get a new loan, you renegotiate the terms of your existing loan.

Modification Options

If you go bankrupt, you and your lender will both suffer. Your lender will be willing to modify your mortgage if he or she is sympathetic to your case. In order to convince your lender that you need to modify your loan, you will need to present your situation in a clear and explicit manner. If your lender if convinced that your situation warrants mortgage modification, he or she has many options.

  • Extend the term of your loan. Your monthly payments will go down, but you will make them for a longer period of time. This solves a cash flow problem.
  • Allow you to miss a few monthly payments if you promise to make the payments at the end of the term of your loan. This is perfect for a person who has cash problems now but foresees financial security in the future.
  • Lower your interest rate. A lower interest rate solves cash flow problems because it lowers monthly payments. You will have to make payments for a longer period of time in order to make up the cost of your loan.