Being a home owner is a dream for many people.
Unfortunately, there may be times of hardship throughout your lifetime. Maybe
you lost employment or simply have more expenses to cover. If you find yourself
struggling with your mortgage payment, a loan modification might be a great
option to avoid losing your home. Following, details what a loan modification
is and the average timeline.
What is
a Loan Modification
The purpose of a loan modification is to
decrease your mortgage payments to an amount you are capable of paying. There
are several different ways a modification can occur. The following options will
be based on a 30 year, 150,000 loan at 6% with a monthly payment of $899.33.
·
Extended Payment Terms: In this scenario, you
will not experience a change in interest or principal. You simply extend the
total time of the loan. Changing your loan from 30 years to 40 years will
decrease your monthly payment to $825.32.
·
Interest Rate Reduction: A common loan
modification is decreasing the interest rate for a certain amount of time. This
is a great option for a temporary situation. This scenario, can decrease your
interest rate from 6% to 4.5%. Your monthly payment would drop to $760.03.
However, if you need a permanent interest rate reduction, you more than likely
will need to refinance.
·
Reduce Amount of Principal: This option is one of
the less successful ones. Basically, your lender reduces the amount of
principal owed. You are not expected to repay the amount deducted.
How
Long Does a Loan Modification Take?
The amount of time it takes to complete a loan
modification varies with every situation. According to loansafe.org, the entire process can take 2 months to 2 years. It is hard to
calculate an exact number. This is why you should be aware of all options
available for your situation.
A loan modification is a good option in many
scenarios. The success rate is unique to every situation. Many factors are
considered, so you should always consult with a real estate professional.
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