The Benefits of a Loan Modification

The benefits of obtaining a loan modification include the following:

Reduction on Monthly Payment and Interest Rate

Your monthly mortgage payment may be reduced to a more affordable payment. This is done by lowering your current interest rate to a lower one. The interest rate could be lowered down to a two percent.

Deferment of Debt or Part of the Principal Balance

The lender could deferred part of the principal balance or from the debt or a combination and put it in the back of the loan. How this works is that the lender will not charge interest on this amount making you monthly payment lower. For example if you have a principal mortgage of about $350,000.00 and you have an outstanding balance of $50,000.00 because you have not been paying your mortgage for a while, with a modification, the lender could add these $50,000.00 to you principal and the new principal will $400,000.00. Now lender after a careful analysis of your financial documents determines that if they remove $175,000.00 from this principal and put it in the back, called "Deferred Principal Balance", you monthly mortgage payment could be lower. For the purpose of calculating your monthly principal and or P&I, your "Interest Bearing Principal Balance" will be $225,000.00*.

Forgiveness of certain Amount from the Principal Balance or the Debt

With a modification part of your debt, the whole debt or even more could be forgiving by your lender. In some cases, the lender could even bring the balance in your principal loan to the actual value of your property! For example if you have a principal balance of $350,000.00 and a debt of $50,000.00 bringing the total loan amount to be $400,000.00 but you property current market value is $225,000.00, the lender may forgive you the $175,000.00 and your new principal balance on the loan will be $225,000.00* and at end of the loan your mortgage will be paid in full.

Possible Modification or Forgiveness of the Second Mortgage

Another advantage of a loan modification is that if you have second mortgage with the same lender or with another lender, if the lender participates in the second mortgage program, under the HAMP program your second mortgage could be modified or better yet it could be forgiven completely leaving you with only the first mortgage under a modification with an affordable monthly payment.

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*These are examples only, we cannot guarantee that this will be your case. The Lenders are the only one who can determine this.