Loan modification and refinancing
Let’s take a look at which is better for you, modifying a loan, or refinancing. If you’ve got a nice income, good credit and you are not underwater on your mortgage loan, you’ll be an excellent candidate for refinancing. Getting a new loan, with new terms is a good way to go.
If you’re looking at refinancing, you can start with your existing lender, but you’re also free to contact other mortgage companies to see if they’re able to cut you a better deal! You’ll have to look at refinancing closely, as there will be costs involved, new closing costs, attorney fees, an appraisal and so on.
But, in the long run it might be well worth it!
On the other hand, if you’re having a tough time financially, or if you’re underwater on your loan, you’ll want to look into loan modification. This may be tough, as many lenders are dragging their feet when it comes to mortgage modifications. Plus, with loan modification, the only lender you’ll be talking with is the one that currently holds your mortgage. In most cases, the only way they’ll even consider a modification is if you can prove financial hardship.
That being said, they might not say “no” either, as they don’t want to lose you as a good customer. The first thing to do is contact your lender and ask them directly if there is a way to modify your mortgage and what their process is to go about it.
Also, check out the government’s web site. ‘Making Home Affordable.’ [link] They have lots of information about loan modifications, and refinancing, aimed at helping you stay in your home!
Wow, free and useful information that doesn’t come across as a sales pitch. It’s all too uncommon, which makes me very happy to have found this. Thank you for sharing some solid and unbiased info.
Unfortunately, the modification programs don’t extend across all mortgage platforms. For example, FHA, VA, Jumbo,Alt A, USDA and other subprime loans DON’T qualify for the Making Home affordable program.
One thing that I have been recommending to my past clients when it comes to refinancing is to take into consideration how long they have been making payments and if they can cut the term down by doing the refinance otherwise they are resetting the 30 yr clock and literally throwing away thousands of dollars. I just talked with a client the other day who has paid for the last 2yrs with a 6% rate and was thinking about going for a 4.5%, they were going to reset the clock and would have thrown away over 50K. Where as if they refi @ 25 yrs they will save appox 75K. Which do you think they will do?
Bill
Thank you for the information. I have been trying to avoid foreclosure bigtime and this helps me put things in perspective