Left arrowBack to Articles + Resources

The Truth About Loan Modifications

The best way to stay in a home that you want to keep long-term may be a loan modification. This involves a lender modifying your payments so that you can afford to keep making them. 

The modification could include lowering the interest rate so that the payment is lower or even adjusting the principle balance on the loan. In a typical scenario, a homeowner will hire an expert to negotiate the modification. Usually, the homeowner will be told to stop making payments during the negotiation, and the lender will tell the homeowner that a modification is being considered.

Advantages

The advantage of a loan modification is that it can make an unaffordable loan affordable. The types of modifications that have a higher success rate involve converting an adjustable rate loan to a fixed rate loan or pushing out the interest rate adjustment for a couple of years.

Disadvantages

The disadvantage of a loan modification is that, based on our observations, most of the time when the homeowner pursues these, they are ultimately not approved or almost certainly not approved in a way in which it is helpful enough for the homeowner to stay in the home. In other words, most of the time it does not work, and and the homeowner is not able to make up all of the late payments, interest, penalties, and legal fees, and thus the result is a foreclosure. We call this the "loan modification merry-go round." The types of modifications that have a lower success rate involve reducing the principal balance on the loan.

Loan modifications rarely work. Before exploring this option, make sure you talk to us. Regardless of your situation, income, or equity, we would like to help you!

Late on house payments?

You can stop foreclosure. Find out how.

More onForeclosure »
Need answers to your real estate problems?Get Help Now
Articles

Get more expertise on your unique home situation.

When you’re faced with a challenging home situation, it’s nice to have a knowledgeable partner by your side. Browse our free articles and find helpful tips to guide your decision.

Coronavirus: Effects on Foreclosures, Evictions, and Loan Forbearance

Posted on April 20, 2020 Like many others, the coronavirus, also known as COVID-19, may have caused you to lose your job or suffer a loss of income. If you’re a homeowner, this loss can be devastating. It may prevent you from being able to pay your mortgag...

How to Stop Foreclosure With a Temporary Restraining Order

The best way to temporarily stop a foreclosure up to the day before an auction, and when a homeowner does not need to otherwise declare bankruptcy, may be to file a Temporary Restraining Order (TRO).  A TRO is a legal order filed by an attorney on behalf o...

8 Ways You Can Avoid Foreclosure

The worst way to lose a house is through a foreclosure. We call foreclosure “the atomic bomb of credit scars.” It cuts the deepest and lasts the longest. When something affects your credit negatively, it lowers your credit score, and the effects last for v...