Mortgage Modification For The Year 2 Thousand 11

A mortgage modification is restructuring your current loan with your lender to change the monthly mortgage payment to an affordable amount

. This is your initial line of defense whenever you have decided you would like to stay in your house, but your present mortgage payments are no longer inexpensive. This could be due to an adjustable rate mortgage which went up, loss of income or any combination of factors.

How Does A Mortgage Modification Work?

A mortgage modification works by changing the loan terms with your lender. This is done by lowering the interest rate, loan extension, or in certain circumstances decreasing the principal (amount owe) on the loan.

Mortgage Modification Scenario A: Lower Interest Rate

Let's say you've a 30-year loan for $200,000 at 7.0% interest. Your monthly payments of principal and interest would be $1,330.60. Your lender agrees to lower your interest rate for a set number of years, normally two to 3. For the next two years your lender lowers the interest rate 4.5%. This changes your monthly mortgage payment to $1,013.37, a savings of over $300.00/month for those two years.

Mortgage Modification Scenario B: Loan Extension

Your current loan is for $200,000 at 6.0% for 15 years. The monthly payments of principal and interest come to $1,687.71. If the lender agrees to extend the loan terms to a 30-year fixed rate loan, the same $200,000 loan at 6.0% is now a monthly payment of only $1,199.10 resulting in a savings of nearly $500 a month!

Since you are never going to recoup any of the lost equity, you refuse to throw away great money after bad on this investment. The lender is threatened with foreclosure. It is a bold move and demands nerves of steel. You are telling the lender, "This house has gone down so much in value it is now worthless to me. I don't care what happens to it. I am never going to get my cash out of it with the current loan terms so you may also just take it back. Nevertheless, if you are willing to renegotiate this loan based on the properties present value, I am willing to stay." Essentially, you're offering to purchase the home back as if it has already gone into foreclosure but with new loan terms.

For much more info on mortgage modification, just visit the links below. They have reviews of the top mortgage modification businesses that will help you get approved.

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by: bob mason

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