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Should You Modify Your Home Mortgage?

Ginger Dean

September 16, 2013

By: Ginger Dean, Home Finance Specialist

In: Finance and Legal

While a home can be your most valuable asset, it can also be your largest liability. If you are struggling with financial difficulties you may no longer be able to afford to keep your home. This is nothing to be ashamed about - it's a reality for many Americans today.Before you decide whether to put your house on the market, consider making an appointment at your bank to discuss a home loan modification.

How can this help? A home loan modification allows homeowners to modify the terms of their mortgage. It is a great way to lower your interest rate, increase your amortization, and make your monthly payments more affordable.

In a nutshell, a home loan modification revises the mortgage terms to make the debt payments more affordable for people who are in danger of losing their home to a foreclosure.

People can be in danger of losing their home to foreclosure for a variety of reasons that include loss of income, declined home value, divorce, and personal illness. Banks understand the reality of the economy. Instead of foreclosing on their clients' homes, they may be willing to renegotiate the terms of the mortgage loan.

The pros of a home loan modification

Your home is now affordable. A home loan modification allows homeowners to renegotiate the terms of their mortgage with their bank. This is an alternative solution to selling your home or losing it to the bank in a foreclosure. A home loan modification allows homeowners to keep their home under the new terms of the agreement. Both the homeowner and the bank have to agree to the new terms, so if the homeowner doesn't agree they may be in danger of losing their home.

You get a second chance to make it right. Revising the terms of a mortgage gives homeowners another chance to correct their financial situation. If both the homeowner and the bank agree on the terms of a home loan modification, it should be considered a blessing. Homeowners should do their best to change their financial habits and make payments on time because they may not always get another chance. Homeowners can only talk to their bank about a home loan modification once every two years.

The cons of a home loan modification

You are still in debt. Even though a home loan modification allows you to keep your home, you are still in debt. If your income is not sustainable then homeowners may find themselves in the same financial trouble a few months down the line. If you really can't afford your home, even with the home loan modification, then maybe it's time to look at the possibility of selling the house to stay out of debt.

It may still be more than you can afford. Just because your bank agrees to modify the terms of your mortgage loan doesn't mean that you can afford the payments. A home loan modification can help improve your financial situation and make your home more affordable but it doesn't mean you are out of troubled waters. If a person's financial situation doesn't change they may eventually lose their home.

There are several factors to consider when deciding to modify your mortgage. The key to success regardless of what you do is to make certain that you can afford the payments. If you cannot, then regardless of whether you keep the existing structure or modify it, you could lose your home. Tread lightly.

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