Adulthood is expensive. One of the most costly expenses every adult all has, of course, is their housing.
Various life events, including divorce or unemployment, may make paying what one owes challenging. As you’re likely aware, falling behind on your mortgage payments can leave you facing foreclosure. A loan modification may be a viable option if you want to hold on to your home.
What is a loan modification?
This process involves you reaching out to your lender and letting them know of your financial hardship. Your lender may offer a variety of alternative payment arrangements in response, including:
- Lowering your interest rate
- Changing your loan from an adjustable-rate to a fixed one
- Deferring or forgiving your principal
- Extending your loan’s repayment terms
- Tacking the amount you owe in arrears to the back of your loan
You may be having difficulty seeing where offering a loan modification would be beneficial to the lender. Litigation is costly, and the bank really doesn’t want to foreclose on your home and assume responsibility for it. Renegotiating the terms of your loan allows you to stay in your house without a lender having to take it back and resell it.
What are the eligibility criteria for a loan modification?
Your lender is likely to allow you to do a loan modification if you can demonstrate that at least 31% of your income goes to housing. The trustee will likely need to approve your loan modification if you’ve already filed for bankruptcy.
Lenders will often allow you to save your home until the day an auction happens. You owe it to yourself to hold on to the home that you’ve cherished. Please continue reading more about your legal options on our site or contact us directly to learn more.