Emergencies happen, and sometimes you might find yourself in a position where you are unable to make your mortgage payments. If you are having trouble coming up with enough money for your mortgage payment, there are options available that can provide you with relief. One of these options is entering into a loan modification program. With a loan modification, you have the opportunity to make permanent or temporary changes to your loan, including lowering your interest rate or extending your payments. More importantly, modifying your loan means you don’t need to default on the loan, and can instead adjust and get your payments back on track without causing too much damage to your credit rating.
Why Do People Choose Loan Modification?
Most people try to change the terms of their mortgage because of financial hardship. To determine the new monthly payments under the modified agreement, lenders use amendments made to your initial mortgage contract.
Are There Different Options for Loan Modifications?
The following are loan modification options offered by most lenders:
- Principal Reduction: With this option, the lender eliminates a portion of the debt so that you can repay less than what you initially borrowed. The lender recalculates the monthly payments based on the lower balance. Principal reduction is difficult to get approved from lenders because of the financial loss they have to take.
- Lowering the Interest Rate: Lenders can choose to reduce the interest rate on the loan, which also lowers your monthly payments. Some lenders will only lower the rate temporarily, so it is important to carefully read all of the terms of the modification so you are prepared for when your payments increase.
- Extended Term: By extending the terms of the loan, you can lower your monthly payments. This is sometimes called a "re-amortization." It is important to note that that extending the terms usually increases interest costs, so you might end up paying more than you initially would on the original loan.
- Converted Fix Rate: If you have an adjustable-rate mortgage you can no longer afford to make payments on, you can try switching to a fixed-rate loan.
- Postpone Payments: With a "forbearance agreement," you can skip a few loan payments as long as you agree to make up those missed payments. The lender will usually add the missed payment to the end of the loan.
It is important to note that some of the modification options listed above are better than others. You should consult with a Chicago mortgage servicing lawyers to find out which option is right for you.
Get Relief From Your Debt Today
At Atlas Consumer Law, our team of experienced lawyers are committed to serving clients throughout Chicago. If you are having issues with your mortgage servicer, you should immediately get in touch with our law firm to find out how we can assist you. We have the skills and resources that you need to obtain a fair case result. Our lawyers are prepared to get to work for you today.
Call (312) 313-1613 to schedule a free evaluation with our legal professionals.