If you are facing financial problems paying your mortgage. Your lender can agree to a mortgage modification and can let you give your home. To qualify for this, you have to prove difficulties in making mortgage payments, documents supporting hardship, and keeping up with the new payment conditions.
Mortgage modification means lowering your monthly payments and if you are facing financial hardship, your lender can lower the scheduled payments. Here is your step-by-step guide for mortgage modification:
What is a mortgage modification?
A mortgage modification is a significant change to your home loan which lenders consider if you are about to miss a loan payment or already missed one or more payments. The objective of a mortgage modification is to prevent foreclosure and convince the lender not to seize or resell your home in such unfavorable conditions. It will lower your monthly payments but will also help you in making your payments easier than before.
How Does A Mortgage Modification Work?
Extend Your Repayment Period
Adding monthly or yearly additional payments onto your loan amount naturally increases your interest and payments but gives you some relaxation to pay them with convenience. Also, when you have a better financial situation, you can make extra payments and pay your mortgage early.
Convert Your Fixed Rate Mortgage To Your Adjustable Rate Mortgage
ARM rates help you get the mortgage loan at the convenience of paying later. With this feature, you have the freedom to choose lower monthly payments according to your present financial conditions.
The lender may reduce the principal amount of your loan and can reduce your monthly payments to prevent you from home foreclosure condition. The lender can help you to make easy payments according to your current financial conditions as a part of your mortgage modification to your loan.
Refinance The Loan
Some lenders can help you with a brand new refinance loan and as a modification, your loan payment difference can be sorted out by selling a part of your home and it can be sold for making your mortgage more convenient.
Reduce Your Interest Rate
Lowering your interest rates on loans can significantly reduce your monthly installments and if the lender agrees, the repayment schedule can be revised with higher interest rates and monthly installments at regular intervals.
How To Get A Morgage Modification?
Gather Initial Paperwork
You will need to have all the papers as a part of your mortgage modification purpose. So be ready with your modification payment plans before the hardship. The goal of this modification is to be ready with these discussions:
The nature of your hardship
The extent of hardship which has reduced your ability to make regular payments
Your ability to commit to making new lower payments for the rest of your loan term
Get In Touch With Your Loan Servicer
This is with the company that collects your payments which is not necessarily to be your original lender. Use the phone number or other contact information found on their website or the documents they have mailed you. You need to start a discussion with them to share your present financial conditions while making initial contact.
Complete and Submit Your Formal Application
A mortgage application form can be obtained from your lender and provided through email. You can submit your application with the supporting documents otherwise you can submit your application via email or by postal mail. Current documents you are likely to provide:
Explanation and evidence of your financial hardship
Current income documentation
Authorization to perform credit checks on all browsers
Your current bank account balances
Another real estate that you own other than those questioned
Complete Trial Payments
After an application process, you may be asked to make three installments in advance which may not be similar to reduced installments before the final mortgage modification. If you are asked to make the payments, pay them in full and on time.
Await For A Final Mortgage Modification Decision
If your application is approved, you will be notified by email or phone call to agree on the new payment schedule.
The Bottom Line
If you are facing financial issues, mortgage modification can be your solution for lowering the monthly payments. A mortgage modification can lower your monthly installments but will increase your overall costs due to increased interest rates and more payments.
If you want to avoid home foreclosures, reach out to your lender to see how he can help. It is difficult to avoid bruising credit scores but wisely check your credit reports and recover from your financial trauma with mortgage modification as soon as possible. Mortgage modification is an effective way to get some financial relief at some extra cost.