Thinking of having your house move into foreclosure is a scary prospect and you want to do all you can to stop foreclosure. You not only lose your house in a foreclosure but you also lose your security and dignity. Also your credit rating plummets drastically. This can cause problems when job hunting, when renting an apartment or you want to get approved for a car loan not to mention several other common place activities. Getting a new mortgage is completely out of the question for a minimum of 5 years.

So what can you do if you are facing this situation? How do you insulate yourself and your family from losing you house? What can you do to avoid foreclosure?

There is one answer that stands far and above the rest: A Loan Modification, which is sometimes referred to as a Mortgage Modification. What follows is a explanation of what a Loan Modification is and how it can help you to stop foreclosure.

What is a Loan Modification?
A loan modification is basically a legal negotiation that takes place between the bank and a home owner’s representative. During these negotiations an agreement is made to adjust the loan’s terms, such as the monthly payment, interest rate or the length of the loan. The outcome is lower monthly payments that are more conducive to the homeowner’s current financial situation.

What would make a lender to be willing to adjust my loan to save me money?
Foreclosing on a house is an expensive process for banks. They have a lot of paper work they have to pay someone to do, they usually sell the home for less than its worth and there is no profit from the interest in the future. In a nutshell it is much more practical for lenders to negotiate than it is to foreclose. It is truly a win/win proposition.

What is it that bankers adjust to make my mortgage payments more manageable?
Essentially there are four possible changes a banker can make to a home owner’s existing loan:

Reduce interest rates – The lender agrees to lower your interest rate which will lower your monthly payments. This is common when your loan is an adjustable rate mortgage (ARM) and the interest rate has gone up beyond what you can afford.

Lower monthly mortgage payments – This is self explanatory; the banker agrees to reduce your payments but you will still pay the entire loan. Often this is, for a a few years.

Reduce the principal owed – There are times when a regions’ housing market decreases so much that a home is worth less than what is still owed. In situations like this the lender could lower the total value of the loan.

Extend the length of the loan – It may sound like refinancing but it is not since you do not have to qualify, there are no closing costs, etc. In this scenario the banker extends the time left on your loan which gives you more time to pay back the same amount of money.

All of these adjustments are designed to reduce your house payments to make your home affordable again. You could possibly be given more than a single adjustment but it is not very common.

The best of these solutions is the reduced interest rate. Not only does it reduce the amount that you have to pay today but also reduces the amount you will be paying over time. If you are looking for a loan modification you owe it to yourself to check out Loan-Modification-Masters.com and apply for a free evaluation.

Get smart about car finance – read how car finance calculator can help.

Filed under: Finance

Like this post? Subscribe to my RSS feed and get loads more!