Mortgage Refinancing and Loan Modification

Calendar September 19, 2009 | Posted by Staff

During the current recession there has been no sector hit as hard as the housing market. Home prices in many parts of the country have taken tumble and many homeowners struggle to keep up with their mortgage payments. The problem has become so widespread that the government and many agencies have decided to offer support to the many mortgage holders in this country at risk of losing their homes. There are two main types of programs intended to help home owners; mortgage refinancing and loan modification. They both are designed to help people with mortgage payments but work in slightly different ways.

Refinancing is when you take out a new loan and use the proceeds to pay off your existing loan. When you refinance you are taking out an entirely new loan and must follow the same requirements as when you took out your initial loan. The requirements may include inspections, attorneys fees, appraisal fees, and insurance. Mortgage refinancing normally happens when the borrower’s financial situation changes. The types of change to a homeowners financial prospects that may warrant refinancing include updated interest rates, improvements in credit score, or increased income. You may also refinance your existing mortgage in order to renegotiate payments terms with your lender.  The government is presently supporting mortgage refinance initiatives through the HARP program, Home Affordable Refinance Program.

The other solution to mortgage problems is loan modification. Loan modification is in many respects a simpler alternative to refinancing because you are only changing particular aspects of your existing loan agreement. Instead of taking out a completely new loan with fresh terms and conditions you enter into an agreement with your lender to amend certain aspects of your current contract. For instance, if you are having trouble making your mortgage payments due to financial hardship you may be able to speak to your mortgage lender and negotiate a lower monthly payment. You may be able to do this by changing the length or other terms of the loan to compensate for the reduced regular payment. Many home owners prefer loan modification because they do not have to go through the hassle of taking out an entirely new mortgage. The government has promoted loan modification for struggling homeowners through the HAMP program, Home Affordable Modification Program.

If you have fallen behind your monthly mortgage payment you are not alone. Due to the current economic crisis millions of Americans are in danger of losing their homes. Fortunately the federal government has decided to act to help keep home owners in their rightful houses. Speak to your lender to find out if you may be eligible for one of the government’s mortgage assistance plans.

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