Friday, May 29, 2009
Are Loan Modifications Good for Homeowners?
You've heard about them and you may have actually spoken to your mortgage lender about one. What I'm speaking of is a loan modification. A loan modification keeps the homeowner in the house and helps the bank to avoid foreclosure or a short sale on the house. Most people who need a loan modification are those who have had trouble making their regular payments due to a significant financial calamity. Some of those include divorce, medical emergency bills, loss of a job, and reduction in the value of the home due to changing market conditions.
Several friends have called me over the years asking me about these. In short, they're a type of refinance on the house. Sometimes the interest rate may be reduced, yet other times it may be increased. Monthly payments could go up or go down. Each situation is different, depending on the amount that is currently owed to get the payments current. The cost to modify the loan is in the neighborhood of two or three times your monthly mortgage payment. If, for example, your monthly mortgage payment is $1000 a month, then the cost to modify is somewhere in the neighborhood of $2000 to $3000. This cost is usually added onto the principle amount owed on the house, so the new terms calculate interest on that amount, too.
Since banks typically only recoup about 65% of the value of a home when they foreclose, they would prefer to modify the loan. Homeowners will benefit by banks that are willing to modify their loans.
There's a great article in Realty Times. If you click HERE, you can read the full article to learn more about the ins and outs of loan modifications.
There are many real estate agents in Middle Tennessee. To work with an agent who is knowledgeable and professional, please give me a call. I enjoy working with first-time and experienced buyers as well as current homeowners.