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Is a loan modification right for me?

Loan modification is becoming an increasingly popular method of saving a home from foreclosure. This is especially true in Florida, where state law now requires lenders to rework loans with terms that are more manageable for the homeowners who are at risk of foreclosure. Nevertheless, lenders are in the business of making money, and many of will still attempt to finalize deals that serve their own interests more than the homeowners.

Loan modification is a very effective tool for people who are struggling to keep up with the mortgage payments under the current terms of their loans. If you feel that you are at risk of foreclosure, loan modification may be a good option for you.

How Does Loan Modification Work?

It may be possible to initiate a loan modification at any point during the foreclosure. Depending on the specific circumstances of your situation, there can be a number of adjustments that may be considered in reworking your loan. Some or all of the following may come into play:

Adjust the length of the loan: In some cases, the bank might offer to give you more time to pay the loan. By taking the principal of the loan and extending the payments over a longer period of time, you can end up owing a lower amount each month.

Lower the principal of the loan: If your home is no longer worth the amount you owe on it, lenders will sometimes agree to rework the loan based on the home’s current value.

Lower the interest rate: Every time you make a mortgage payment, part of it goes to pay the interest on the loan and part of it goes to pay the principal. Lowering the interest rate will reduce your payment by reducing the amount of interest you are required to pay on a monthly basis.

These are complex processes, and the assistance of a lawyer can be extremely helpful. Before you initiate negotiations with your lender, talk to a lawyer who can help you understand your rights and what to expect at each stage. In many cases, having a lawyer represent you in modification negotiations can help to ensure that you receive a positive result.

Come back next time when we will discuss what you can do if the bank says you are not eligible for a loan modification.

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