How does a Mortgage Modification Work

If you find yourself “underwater” with your home mortgage, which means you owe more on your mortgage than your house is worth in the current market, you may want to consider applying for a mortgage modification. In many areas of the country, people purchased homes in recent years and then the values of homes may be dropped drastically in some areas. 

Many lenders are willing to work with you to modify your mortgage since in most cases it will save them the trouble and expenses of foreclosing on your home. If you find yourself having trouble paying your mortgage, it is very important to contact your lender as soon as possible so they can try to help you before you get into deep financial troubles. It is better to confront it than to ignore it.

With a mortgage modification you may be able to change some of the terms of your mortgage to make it easier to keep up with your monthly mortgage payments. Some items that are modifiable are the interest rate, amount of monthly payment, number of years to pay off the loan, late charges and penalties.

Once the terms of the mortgage modification are agreed upon by both parties, a new mortgage will be drafted with the revised terms of the mortgage. 

You may be able to extend the number of years to pay off the loan to make the monthly payments lower. You will likely end up paying more in interest payments by doing this, but it will make paying your monthly payments more manageable.

If you have been accessed late charges or penalties, the lender may forgive these charges if you are making an effort at making your monthly payments.  Even though they will lose out on the extra money, it may be worth it to the lender to help you remain in your home. There are considerable costs associated with foreclosing on a home that they can avoid if you remain in your home.

It is important to get as much information about mortgage modification as you can when making a decision. In some cases, you may have purchased more home than you can afford and may be better off selling the home than trying to modify your mortgage.

If your home mortgage is “underwater” and you are having difficulties making the monthly mortgage payments, it may be useful to consider a mortgage modification. There are several things to consider before signing a mortgage modification agreement. It is important to research it and be knowledgeable before signing an agreement.