Loan Modification For Underwater Homeowners: What You Need To Know Before Asking For A Mortgage Modi
By Homeowner101.com
The great recession and the mortgage meltdown have left millions of Americans with smaller pay checks, underwater mortgages, and a great deal of insecurity about what most have long considered their most secure asset: their home. Luckily there are a number of options that may enable homeowners to weather the storm and lighten the load.
A loan modification is one of those options. A loan modification is an adjustment to the original terms agreed upon by the lender and the borrower. There are three areas that can be adjusted: Interest rates, principal owed and length of the loan.
One of the most commonly known types of loan modification is a refinance, which is paying off your existing mortgage with a new mortgage at a lower interest rate on a new loan that will lower your monthly payment. This type of loan modification can be beneficial; however, if you have already made many years worth of payments, there are extensive closing costs associated with the modification, or if the modification will extend the life of your loan past the time you intend to retire, a refinance may not be the best option.
Another loan modification option is called a term extension. A modification with a term extension essentially lowers your payment by extending the life of your loan. This option affords you the opportunity to reduce your payment and still leaves the chance to pay down the principal when and if it suits you.
A step rate loan modification is one that is more temporary that the other loan modification options mentioned, however, it will still provide a borrower in financial hardship some short-term relief. A step rate loan modification drastically lowers your interest rate in the short term, lowering the payments and slowly rises back to the original rate over the course of a negotiated term.
Other less common loan modification options include reductions in principal and locking in a variable interest rate at a manageable fixed amount. In March 2009, President Obama launched two programs to help homeowners keep their homes and lower their payments. These federal programs are known as HARP and HAMP. Both of these loan modification programs have several requirements to qualify but the federal government is lending a hand where it can. While it may feel overwhelming and there is no way to save your house, know that there are several mortgage modification programs out there that may help.
Homeowner 101 provides underwater homeowners the AIR (Answers, Information, and Resources) they need to be empowered, so you can make an informed decision about your underwater mortgage. To know what is best for you and your family, make the Homeowner 101 Assessment & Action Plan your first step.
The great recession and the mortgage meltdown have left millions of Americans with smaller pay checks, underwater mortgages, and a great deal of insecurity about what most have long considered their most secure asset: their home. Luckily there are a number of options that may enable homeowners to weather the storm and lighten the load.
A loan modification is one of those options. A loan modification is an adjustment to the original terms agreed upon by the lender and the borrower. There are three areas that can be adjusted: Interest rates, principal owed and length of the loan.
One of the most commonly known types of loan modification is a refinance, which is paying off your existing mortgage with a new mortgage at a lower interest rate on a new loan that will lower your monthly payment. This type of loan modification can be beneficial; however, if you have already made many years worth of payments, there are extensive closing costs associated with the modification, or if the modification will extend the life of your loan past the time you intend to retire, a refinance may not be the best option.
Another loan modification option is called a term extension. A modification with a term extension essentially lowers your payment by extending the life of your loan. This option affords you the opportunity to reduce your payment and still leaves the chance to pay down the principal when and if it suits you.
A step rate loan modification is one that is more temporary that the other loan modification options mentioned, however, it will still provide a borrower in financial hardship some short-term relief. A step rate loan modification drastically lowers your interest rate in the short term, lowering the payments and slowly rises back to the original rate over the course of a negotiated term.
Other less common loan modification options include reductions in principal and locking in a variable interest rate at a manageable fixed amount. In March 2009, President Obama launched two programs to help homeowners keep their homes and lower their payments. These federal programs are known as HARP and HAMP. Both of these loan modification programs have several requirements to qualify but the federal government is lending a hand where it can. While it may feel overwhelming and there is no way to save your house, know that there are several mortgage modification programs out there that may help.
Homeowner 101 provides underwater homeowners the AIR (Answers, Information, and Resources) they need to be empowered, so you can make an informed decision about your underwater mortgage. To know what is best for you and your family, make the Homeowner 101 Assessment & Action Plan your first step.