Refinance or modify your mortgage to save your home
You can refinance your existing mortgage to save your home. Many homeowners are doing so. If you are finding it difficult to make your monthly mortgage payments, you can always talk to your lender to work out an alternative that can make you catch up with your monthly mortgage payments. There are 2 ways you can save your home from foreclosure. One is loan modification and the other is mortgage refinance.
Loan modification
When you apply for loan modification, if your lender approves your loan modification request, he can help you in 3 different ways to make your monthly mortgage payments more affordable. He will either change the current rate of interest from adjustable-rate mortgage to fixed-rate mortgage so that your payments are predictable each month and not influenced by the market.
The other way he can help you is by increasing the term of the loan so that you get enough time to pay up. And the last option is by reducing the principal balance of the loan. However, you need to furnish documentary evidence that you are facing financial hardship. Loan modification doesn’t take into account your credit score and you don’t have to shell out fees for getting your mortgage modified.
Mortgage refinance
In case you are opting for mortgage refinancing, you take out another mortgage to pay off the first mortgage using the same collateral. When you refinance your existing mortgage, you get to enjoy better rates and terms. In case you have some equity left in the property, you can avail a cash-out refinance so that you can get some extra cash that can be used to pay off your other debts.
An important aspect that distinguishes loan modification from mortgage refinance is the fee you shell out. While you don’t need any fees in case of loan modification, you have to pay fees if you are opting for mortgage refinance. You may have to pay fees that include appraiser fees, escrow fees, taxes, lender fees, title fees etc.
The Obama Administration introduced the Making Home Affordable Plan that was expected to help as many as 7 million to 9 million homeowners by preventing their homes from getting foreclosed. However it failed to address the needs of majority of the homeowners due to stringent eligibility criteria.