If you struggle to make your monthly mortgage payments, you may be at risk of losing your Florida home. Depending on how indebted you are, you may even consider filing for bankruptcy to get a fresh start. Before you take such a definitive action, consider first the benefits of a loan modification. NerdWallet explains all you need to know about mortgage modification.
Loan modification refers to the process of modifying the original terms of your mortgage loan. Loan modification differs from refinancing in that it does not require you to replace your existing loan with a new one. Instead, you simply change your existing mortgage.
The changes to which you and your lender agree depend on your specific circumstances. You may wish to extend the life of your loan, switch from a variable interest rate to a fixed-rate mortgage or lower your interest rate. Ultimately, the goal of modification is to lower your monthly payments so you can more easily afford them.
Though many lenders are likely to agree to a modification, as it means they can negate the costly foreclosure process, not every homeowner qualifies for this process. To qualify, you must either be behind on your mortgage by more than 60 days or show that you are in imminent default. Imminent default means that you may not be delinquent yet, but there is a high probability of you becoming delinquent. You must also demonstrate to your lender that you incurred a hardship that negatively impacted your ability to pay your mortgage. Examples of qualifying hardships include the loss of a spouse, job loss, disability or illness,
NerdWallet does warn that loan modification may affect your credit score. Though the impact should not be as significant as if the bank were to foreclose on your home, it could affect your interest rates and terms on future loans.
You should not use this article as legal advice. The contents are for your educational purposes only.
