Should I apply for a home loan modification?
When you are experiencing financial difficulties, you would do almost anything to keep from losing your home. The thought of foreclosure is enough to cause chronic stress and fear in any Mississippi resident. Fortunately, you have options that may allow you to keep your home and make your debt more manageable, such as Chapter 13 bankruptcy. You may also have been advised to apply for a loan modification, but you might hesitate before you learn more about this option.
U.S. News & World Report explains that there are positive and negative aspects to getting a mortgage modification. The immediate benefit to a modification is that the lender lowers your payments, which can help your mortgage payments fit nicely into your monthly expenses. However, the numerous downsides to a loan modification can include the following:
- A loan modification can significantly raise your interest rate and add years to the length of your repayment schedule.
- The lender may mislead you on the terms of your loan and other options that could better fit your situation.
- The lender may tell you that it will forgive a portion of your loan with the modification, only to add the “forgiven” amount to the end of the loan without your knowledge.
- A loan modification can involve lots of paperwork, hassle and time.
- Scammers posing as legitimate lenders often target people desperate for help, and they may ask for up-front processing fees, which are illegal.
When you file for Chapter 13 or you are having difficulty keeping up with your mortgage payments, companies may contact you offering a loan modification to “solve your problems.” A legitimate modification may help you temporarily while you rebuild your credit if you plan on refinancing later to get better interest rates. It helps to understand your other options if you are unwilling to accept the downsides to a loan modification.