A loan modification is the most popular solution for helping a homeowner avoid foreclosure. It can also help a homeowner achieve a lower monthly mortgage payment that is more affordable for their financial needs. But you must fit all the qualifications set by your lender, in order to be approved for this type of assistance.
Homeowners who are not familiar with this process may wonder "What are the advantages and disadvantages of a loan modification?" One thing for sure is that there are many benefits that come along with this type of assistance.
Below you will find common advantages and disadvantages that come along with a loan modification:
- Lower interest rate on your mortgage. If you qualify, you may be able to lower your current monthly interest rate on your mortgage. With a low interest rate your monthly payment will decrease dramatically.
- If you are one of many homeowners that purchased an adjustable rate mortgage (ARM). Most of these borrowers are now realizing that once the interest increase rate adjusts, they will no longer be able to afford the payment. With a loan mod you may be able to get out of the ARM and into a fixed rate.
- Stop foreclosure proceedings from taking place and remain in your home. Over the past two years foreclosure rates have skyrocketed across America. By doing this your lender will apply the late charges to the back of the loan, stop foreclosure, and give the borrower a fresh start.
- You accept a modification that your truly cannot afford and later are foreclosed on anyway.
- You continue paying on an underwater asset that may take years to come up in value.
- Some lender may make you sign away your legal rights on the original mortgage
I have to say here are not too many disadvantages that come along with it. What do you have to lose? The only thing I have to say is that the process is very time consuming and you must have patience. Personally I have seen it take anywhere from 45 days to a whole year to complete.
If you are having difficulties paying your monthly mortgage payments and are in need of assistance, a loan modification may do the job!