If an individual is having trouble effectively managing his/her mortgage loan, he/she may want to consider a mortgage loan modification. A mortgage loan modification works similarly to loan refinancing. By obtaining a modification, an individual will be able to acquire loan terms that he/she is able to manage. This usually involves more affordable monthly payments.
However, there are some important differences between loan modification and loan refinancing. When an individual refinances a loan, he/she obtains an entirely new loan, which pays of the old loan and provides him/her with new loan terms. If an individual chooses to acquire a mortgage loan modification, he/she will maintain his/her existing loan, and changes will be made to the terms and conditions of the loan.
If a homeowner is experiencing financial difficulties and is not eligible to refinance his/her loan, he/she may qualify for mortgage loan modification. Loan modification was developed to provide struggling individuals with additional options. This course of action is generally only recommended for individuals who are not able to make existing monthly payments.
It is usually reserved for people who have previously missed mortgage payments and who have not yet filed for bankruptcy. A mortgage modification can only be acquired from the mortgage lender. Therefore, an individual must work closely with his/her lender to develop terms that are suitable to his/her financial situation. It is important to note that loan modification will affect an individual’s credit; however, it may be appropriate if an individual has exhausted other options.