A loan modification is a modification to your existing home loan to avoid default and keep your home during specific times of financial hardship.
You negotiate with your lender to reduce your monthly payments so you can afford your monthly payments despite your current financial situation. Commonly this is done by lowering your mortgage rate or extending the loan’s term.
Usually, though, a mortgage loan modification does not replace your existing home loan or change your lender; it just allows you to strike a temporary deal that gives you the time needed to improve your finances. It restructures your loan, thus making it more manageable for you and allowing you to create new, lower mortgage payments.”
The principal amount of your existing loan amount won’t change, but your lender will agree to lower your interest rate, lengthen your payoff terms, or combine both. These strategies could also help reduce your monthly mortgage payments while reducing the total interest you pay overall. Modification may also involve switching from an adjustable-rate mortgage to a fixed-rate loan and rolling any late fees into your principal.
So, if you are experiencing any of the following:
- Temporary or long-term financial hardship.
- Having trouble making monthly mortgage payments.
- You are 30-60 days late on your mortgage payments.
- You are currently in forbearance but don’t know what will happen when your forbearance ends.
You need to consult and obtain the guidance of a Loveland Bankruptcy lawyer to investigate loan modification options. Mortgage relief options are not a one-fits-all situation. Your lawyer will provide you with options to maintain and keep your family home. Negotiation with your lender is critical, and your Loveland Bankruptcy lawyer is an expert in working with lenders in ways that benefit you.
Would Refinancing My Current Loan Help Me More Than a Loan Modification?
When you, as a homeowner, need a lower mortgage payment, you may consider refinancing your current loan.
Mortgage refinancing will replace your current loan with a new one that has a lower interest rate, a longer-term, or both. This could result in a permanent reduction to your mortgage payments without negatively affecting your credit score.
However, the looming problem here is that if you are going through financial hardship, you may not be able to qualify for any refinance program. If you’re already behind on mortgage payments, you may not be eligible for any refinance program. If your credit score has been affected, you probably won’t be able to obtain a new mortgage.
Consulting with a local Loveland bankruptcy lawyer will open all the viable options to you in your current situation. Very few lenders, if approached with a reasonable, well-thought-out financial plan, will move forward to the time-consuming, stressful, and costly foreclosure process. Your lawyer knows this and is well-equipped to draft a plan that will work for your lender and is in your best interests.
What Is “Forbearance” and Will That Work To Help Me?
Forbearance is simply another option that your lender may be open to during your times of financial stress. Loan forbearance is another negotiated and usually temporary plan that will pause any mortgage payments while you get back on your “financial” feet.
In these current times, many homeowners who lost their jobs or experienced reduced income (especially during the COVID pandemic) were able to request forbearance for months or more. However, this is a very temporary condition and currently may be much less of an option due to the high number of forbearance cases provided over the last two or more years.
On the other hand, mortgage loan modification is a negotiated permanent plan designed to meet your needs and the needs of your lender. Forbearance and loan modification can sometimes be used to make an even more effective mortgage relief plan.
You must note that forbearance is a temporary solution to a possible lengthy financial issue. However, If your income is still reduced at the end of the forbearance period, your lawyer may still be able to get you approved for a permanent loan modification.
What Are Some Things Involved In the Loan Modification Process?
When consulting with your Loveland loan modification lawyer, you will analyze all your financial details with them and draft a viable plan that works for you now. Your lawyer will then contact, present your plan, and negotiate on your behalf with your lender.
Commonly your lawyer will speak with someone in the “loss mitigation” or “loan modification” department. They usually keep a computerized copy of any conversations so that you can refer to the details in the future.
You must organize all your current financial documents for your lawyer to formulate a rational and workable plan to present to the lender. They’ll want to know your complete and genuine financial situation as of right now, so you can prove that you can afford the new reduced monthly mortgage payment.
You may be asked to fill out a new application, but the more organized you are, the more successful you will be at solving this severe and possibly life-changing issue. The expertise of your Loveland bankruptcy or loan modification lawyer will be invaluable in this step of the process, so your plan is presented clearly, and is proven to be achievable in your current financial solution.
I Feel That I Need a Loan Modification; How Should I Proceed?
There are numerous reasons today for you to be in immediate financial hardship. Still, if the home is your primary residence of your and your family, you should almost always be able to agree with your lender for a reasonable modification.
However, there’s considerable work involved, such as collecting documents, preparing the proposal to the lender, and negotiating the terms. The good news is that you have options, and loan modification is a legal way to keep your home while you are recovering from a limited financial setback.
Your Loveland bankruptcy and loan modification lawyer’s advice and guidance will be invaluable in helping you navigate this legal process and secure the most favorable loan terms. So, don’t try this on your own, as too much is at stake. Consult with your local lawyer, and ensure your home is secure for years to come.