If you're defaulting on your monthly mortgage repayments and can't seem to find a way out of the fix other than foreclosing your property, "mortgage loan modification" could help you fix the situation. At the end of this article, you'll understand what loan modification is all about and how it works to help you save money. You will also discover all about loan calculators and see how you can use them to check out if you qualify for loan modification.
Loan modification is the process where a home owner and a bank mutually agree to swap in the old terms of a loan or mortgage repayment plans for new terms. The new terms usually include a form of compromise which is generally accepted to both the lenders and the borrowers. The new monthly repayments would be lower than the previous rates but the banks would prefer your consistent payments on the loans instead of defaults. You will need to apply for application for modification through the banks or federal government.
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There are a lot of procedures or ways for carrying out loan modification. You can reduce your monthly mortgage payments using loan modification by:
1. Decreasing the interest rate
2. Extending the terms of the loans.
3. Forbearing some of the loan principle
With modifications, your overall motive is to reduce your monthly mortgage payments to a level you can easily afford using one or a combination of the three methods. Overall, you might not be saving so much money on the long run but it can help you reduce your monthly mortgage payments on the short term so that you would be able to continue making payments.
How to discover if you are eligible for loan modification.
You can simply discover your eligibility for a loan mod by using a loan calculator. You can get one on the websites of most banks to help you determine if you qualify.
There are other basic criteria you would need to meet too to qualify. For example, if you will like to modify the mortgage on your primary residence, a lot of banks will like to see the percentage of your gross monthly earnings that would be going into the payment of your mortgage. The principal, interests, taxes and insurance (PITI) of the mortgage are inclusive. Though the minimum percentage required varies, most banks will love to see that you are paying more than thirty five - forty five percent of your gross monthly income on PITI before they modify your loan.
You can easily calculate your household's gross monthly income to know what you'll be repaying in terms of PITI payments. Do the maths yourself or simply plug them into an online calculator to know if you're qualified for your bank's loan modification program.
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