If you’re struggling to afford your mortgage, something that you may want to discuss with your lender is seeking a mortgage modification. A mortgage modification changes your current home loan and lowers the monthly payment.
Not everyone can get a mortgage modification, but if you can show that you are in a difficult financial situation or that your financial situation has changed, then they may be willing to work with you instead of having you miss payments.
How does a mortgage modification help?
Depending on the kind of help you qualify for, a mortgage modification may:
- Extend your repayment period
- Convert your mortgage from an adjustable rate to a fixed-interest rate
- Reduce your overall principal
- Reduce your interest rate
- Refinance your loan, so you have lower payments
To qualify for a mortgage loan modification, most lenders require that you’re at least one payment behind and are dealing with significant financial hardship. Some common reasons for financial hardships include:
- Uninsured loss of property
- A sudden increase in housing costs
- Divorce
- The death of a family member and loss of their income
- Long-term illnesses or disabilities
- Natural disasters
If you decide to seek a mortgage modification, it may be reported. Your credit score may be affected. However, the damage is normally much less severe than a foreclosure would cause.
There are alternatives to a mortgage modification, so if this doesn’t seem right for you, you may want to talk to your attorney about other options that would get you back on track and help you stay in your home despite current financial difficulties.
