Online Financial Tips

Archive for May 30th, 2011

Most home-owners are facing financial victories and losses in this sluggish US economy. The biggest financial challenge that the Americans are facing in this period of economic malaise is to keep up with their refinance rates. There is thousands of stories everyday where a home-owner is unable to make his monthly payments on the mortgage loan and is ultimately facing a foreclosure. This is boosting the number of foreclosures and hampering the US real estate economy. As an American, you must be aware of home loan modification as a successful way of making the terms and conditions on your loan affordable. But the question lies as to whether home loan modification successfully

saves your home from foreclosure. Read on to know the answer.

What is a mortgage loan modification and how does it work?

Loan modification involves a process where the home-owner is allowed to change the terms and conditions on the home loan making it more affordable. Most homeowners face a foreclosure due to inability to arrange their monthly payments. Therefore, once they think of going for a loan modification, they can reap the benefits of lower interest rates. There are multiple benefits of a home loan modification that can help you save your home from a foreclosure.

How can a home loan modification help you avert a foreclosure?

Undoubtedly, loan modification is the only way that can help you avoid a foreclosure. Have a look at the ways in which it can save your home ownership rights.

• Lowers the interest rates on your loan: If you have taken a secured home loan and you’re not able to keep up with the monthly payments due to the huge interest rates. You can easily revise the interest rates by applying for a loan modification from your present lender and repay your debts in easy affordable payments.

• Change the loan type: You can also change the type of the loan, for instance an ARM to an FRM or a fixed rate mortgage so that you can at least stabilize the interest rates and the monthly payments throughout the term of the loan. This may save you from being subject to outrageous interest rate hikes in an adjustable rate mortgage.

• Extend the term of the loan: A home-owner can also extend the term of the loan so that the monthly payments are automatically lowered. If you had taken a 15 year term loan, you can increase it to a 30 year term loan and thereby lower your mortgage payments.

Who can be eligible for a home loan modification?

Not everyone qualifies for a home loan modification. If your lender agrees to your application for a modification, you can pay off your loans in a systematic way. The fact that whether or not you’re eligible for a loan modification does not depend on your lender or the mortgage services. If your mortgage loan is being held by Freddie Mac or Fannie Mae, then you may be eligible for the government loan modification program or the Making Home Affordable Program. You may also need to provide the proof of your financial hardship and also the assurance that you will be regular on your payments as it is modified.

Therefore, if you’re keen on retaining your home ownership rights and protecting your credit score from being hit, you can opt for a home loan modification. Consider the benefits and the eligibility mentioned above before taking the decision.