You finalize a loan with the intention of making payments for a very long time. But what happens if your salary decreases and you are no longer able to afford that loan payment?
You might be able to preserve your loan through loan modification in spite of your altered circumstances. For a few different types of loans, including student loans, modification may be a possibility. Mortgage servicing companies provide modifications to assist homeowners in avoiding foreclosure.
What Is a Loan Modification?
A house loan’s conditions can be changed through a mortgage loan modification. The idea is to get your payments back to a level where you can continue making mortgage payments and keep your house.
Mortgage servicers attempt to employ loan modification to stop defaults or cure delinquent mortgages. “They would rather make sure that payments are coming in than go through the expense and challenges of trying to foreclose,” says Igor Roitburg, managing director at Stretto, a bankruptcy services and technology company that provides an online platform for assembling mortgage modification documents.
When Is a Loan Modification a Good Idea?
A modification is typically a suitable choice if you are unable to make your mortgage payments but still want to live in your house, according to Roitburg. He asserts that the main advantage anticipated by borrowers is their ability to prevent foreclosure.
Your credit score may go down even after a modification, although typically not as much as it would after a foreclosure.
Read the modification’s conditions carefully and keep an eye out for any unusual provisions, such as a balloon payment that requires you to make a sizable payment all at once when the loan term is up.
If your loan is modified, you can have a longer repayment period and pay more interest overall. But if your objective is to keep your home, paying more interest over time is frequently desirable.
How Can You Get a Loan Modification?
You must be in default or on the verge of going into default in order to qualify for a loan modification. A homeowner can find themselves in this circumstance as a result of a tragic occurrence, like losing their job or losing a family member. When you submit an application for a loan modification, you must provide your servicer with proof of this occurrence and an estimate of your future monthly payment capacity.
Calling your mortgage servicer and stating that you are unable to pay your mortgage are good places to start the process. The servicer will either mail you an application package or provide you internet access to the bundle.
You complete the application and offer evidence of the suffering you went through. If you are an employee, you must provide pay stubs and a tax return; if you are a self-employed person, you must provide bank statements and other evidence concerning your business income. You might also be questioned about your possessions and debts.
The servicer verifies that you have submitted the relevant documentation once you return the shipment.
The servicer assesses your application after the package is finished. It gives you a document describing the terms if it determines that you qualify for a modification. This is signed and returned to the servicer.
There is frequently a trial period. For instance, the servicer will make the change permanent if you pay the first three modified installments on schedule.
You may normally appeal the judgment and request that the servicer reevaluate your documentation if the servicer rejects your application. However, you might need to think about other possibilities at this time.
Read Also: Experts says prices to hold strong