Is Loan Modification a Good Thing for Me

Many people talk about loan modification. Loan modification is a hot media issue too. If you have heard the term but do not know what it is all about, keep reading.

It basically means that there is a renegotiation between the lender and the borrower on the terms of the contract, the mortgage. For many it means a new possibility to stay in their home, avoid foreclosure.

The PROs of a loan modification to the borrower include:

· Not having to move out

· Lower mortgage payments

· No foreclosure

· Lower interest rate

· An increase in the duration of the loan, even up to 40 years

· A more fixed interest rate for at least a part of the duration

The PROs of a loan modification to the lender include:

· Not being stuck with a house that is not in use because of foreclosure but having a loan running that is beneficial to the lender

· More loans are current and less accounts that are in default

· They do not aspire to possess your home

There are a few things you, as a home owner, have to consider when you are proceeding with a loan modification.

· Sometimes lenders defer fees and amounts that were not paid to the end of the duration of the loan. Make sure you are aware of these responsibilities that will show up later on in the loan. After all these lenders are still trying to make a deal that is best for them (and that is normal, it is business) and if you want a deal that is good for you make sure you are aware of everything before you enter a deal. A deferred loan payment is not a real help if you have problems keeping up with your loan. It is just going to put you in foreclosure a little later. A new deal is only good if it lowers what you have to pay every month from now on.

· Only the modification department can help you with these kinds of things, so talk to your lender's modification department. You do not want to rotate within their collection department. They do not serve the same means. Most modification departments are not adequately staffed yet and hours can go into trying to find the right person to negotiate with.

· A reduction of at least 20 % but up to 40 % is what you should go for. Do not listen when they try to convince you that a payment deferring to the end is the solution to your problems. You need to negotiate toward a monthly payment that fits your budget. You do not want to pay at the end for bad negotiating.

Some people benefit from a mortgage modification, but others do not. If you can afford a fair mortgage payment but you got behind because of an accumulation of bad luck then a mortgage modification is what you should try to get. Making even little mistakes in the negotiating process can be a big deal when you look at the total picture. To get into a good deal with your lender you might want to consider talking to a specialized company that will do the negotiating for you. You need a company that is trustworthy and if a money back deal if not happy is not available you should get extremely careful.

There is a price tag attached to mortgage modification. You will find that these price tags range from 2,000 dollars to 5,000 dollars. Most companies will have a minimum fee, but it is a good idea to consider a fee of about the cost of one payment. It is not cheap but it is so much better than being evicted so it is worth taking it into consideration. Try not to get into any traps that are out there if you try to accomplish this on your own. Even at the start of the deal, let us say within the first 5 years, you should see a considerable advantage to the deal, even thousands of dollars. Usually you are being charged for those costs and fees during the first two months or so of the new deal. For many home owners mortgage modification is a real form of relief. Your creditor is not interested in putting his name on your house. See how far you can get with negotiating. Keep your American Dream of being a home owner by working out a deal that is good for both parties.