The rate of foreclosures seems to be dominating the news lately. Millions of people are losing their homes for many different reasons. However, not all homeowners are having the significant financial difficulties that come with losing their homes. Many people are able to save their homes through several options that are available to them.
The most common options available for homeowners is a home loan modification or a home loan refinance. These loan options has some similarities but are generally completely different. Understanding the difference in these options will allow a homeowner to decide which choice is best for them.
A home loan refinance is basically an entirely new loan. The homeowner must have sufficient equity in their home in order to qualify for this loan. The homeowner must also have a stable source of income. They can not have any delinquent, or derogatory, information on their credit reports. Many homeowners choose a home loan refinance to obtain a lower interest rate, lower payment, or to pay off other debts. People who are interested in doing a home loan refinance are encouraged to obtain interest rates and fee quotes from several lenders. This will help insure they receive the lowest rates, and fees, available.
A home loan modification is when a lender modifies the homeowner’s current mortgage loan. Majority of mortgage lenders require a homeowner to be having financial difficulties in order to obtain a home loan modification. This type of transaction involves restructuring the debtor’s current mortgage loan. Many times the homeowner is able to obtain lower interest rates on a home loan modification. They are also, typically, able to receive lower payments on their loans. Many lenders will add any delinquent payments back into the loan while doing this process. They may also extend the terms of the loan out past the original maturity date.
Basically a loan modification is for individuals who have experienced a financial hardship. Many times homeowners who obtain a loan modification have experienced a decrease in their home’s equity. People who are seeking a loan modification must go through the lender their mortgage is currently with. They are unable to seek quotes or options from other lenders. Home loan refinances, on the other hand, are typically for individuals with good credit standing and sufficient equity in their homes. Both types of mortgage tools are designed to help a homeowner obtain a lower interest rate and payment when possible.
Loss Mitigation & Mortgage Loan Modification Attorney Blog 