What Is A Loan Modification And How Can It Help Stop Foreclosure On My Home?
The foreclosure crisis is growing every day across the United States. Today, many Americans are wondering what is the best strategy to help them keep their homes in order to avoid foreclosure. With the “American Dream” of homeownership still very much alive, people today don’t want to sell their home in order to escape foreclosure. Many would prefer to keep their home instead.
The best, fastest and easiest way today if you’re interested in saving your home from foreclosure and trying to keep it is through a loan modification.
A loan modification is exactly what it sounds like. It’s the modification of your existing loan. The interest rate on the loan can be modified (lowered) so that the homeowner’s monthly payment can be reduced.
The principal balance on the loan can also be reduced in a successful loan modification. This is a particularly effective strategy for homeowners who live in areas where the housing prices have fallen dramatically over the past few years. In fact, for homeowners who are “upside down” in their mortgage (where the loan balance is greater than the value of the home) a loan modification is one of the best ways to avoid foreclosure and keep your home.
In fact, many times when a successful loan modification is done, not only is just a lowering of the interest rate, or a reduction in the principal balance of the loan, but it’s often both! Homeowners who are behind on their mortgage payments but get their loan modified successfully benefit tremendously when both their interest rate is reduced along with their principal balance, making their monthly mortgage payment much more manageable.
Loan modifications are a tremendous alternative to refinancing, because in today’s mortgage climate, once a homeowner is late on their mortgage payment, they won’t qualify for a refinance. And unlike refinancing, loan modifications have no closing costs, just a simple loan modification fee.
As for the outstanding arrears on a loan when the homeowner is behind on his mortgage payment, one of two things will happen with a successful loan modification:
The arrears will added onto the back of the loan, so that they become part of the principal. Alternatively, for homeowners who are “upside down” on their mortgage, a loan modification can help you in getting the arrears completely removed from your loan balance.
From this brief but informative article, you can easily understand what a loan modification is, and how it is a very effective tool to help stop foreclosure on your home and help you keep your property.
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