Loan modifications are one of 7 ways that all property owner can renegotiate the terms of a mortgage with their lenders, even owners with high incomes and investment properties. You can learn more about these 7 solutions with our special article, The Seven Ways To Swim When You’re “Under Water”. This article highlights the various trade-offs of each solution and explains why Congress and the Obama Administration have endorsed loan modifications as a central policy in America’s economic recovery.
But what is a mortgage loan modification?
Simply put, it is a negotiation with your lender through which concessions are made and new conditions are set that will result in a new, more manageable mortgage for you in the future. After modification, your new mortgage will result in:
- A lower interest rate, or a change from a floating rate to a fixed rate, or a change in how a floating rate is calculated
- A reduction in the principal owed on the mortgage
- A reduction in late fees and other penalties accrued over a period of delinquency
- A longer term, in years, on the mortgage
- A cap on the monthly mortgage payment to a percentage of your household income
That’s it!
At the end of the loan modification process, one or more of the five terms listed above will be renegotiated so that you can move forward on a stronger financial footing. And because loan modifications are the most flexible way to alter the terms of a mortgage — applying to just about everyone who owns property — you don’t have to worry about whether or not you qualify. If you own any property, you are most likely eligible to pursue a modification of the five terms above. The only changes based on your situation are the tactics you need to get your loan modified successfully and advantageously.
Learn more about how to develop that strategy here.