What is a Loan Modification

A loan modification is when the terms of your current loan are modified by your lender.  This could include the term, interest rate, the type of loan, or all of the above.  

Definitions

Loan Term

This is the length of time the loan payments are spread out.  Most Home Mortgages are 30 year, but sometimes 20 year, 15 year, and in some higher priced states 50 year loans are even possible

Interest rate

This is the interest that the bank charges you to borrow money.  The Interest is amortized over the term of your loan.  

Loan Type

Loans can be fixed where the interest rates is consistent throughout the life of the loan, or it can be variable where the interest rate  may change after a specific number of years. Example a 5 Year ARM loan will change to a market interest rate after 5 years.  This could result in higher or lower payments.

Why lenders agree to Loan Modifications

The last thing the lender wants is for the home owner to miss payments due to financial difficulties.  They would rather modify the loan to keep the home owner able to make payments.

Can I just call my lender and ask for a Loan Modification?

You can try, but similarly to going to court, your results may be better if you hire a professional who is familar with the process and protocols.  A professional negotiator will know how to sell your situation to the lender to maximize your results.  


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