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Many homeowners are struggling to make their mortgage payment and are looking into mortgage modifications as a way to avoid foreclosure. But what is a bank mortgage modification and how can it help you stay in your house?

What Is A Bank Mortgage Loan Modification?

A bank mortgage loan modification is any permanent change made to a mortgage contract. It differs from a mortgage refinancing because, unlike a mortgage refinancing, it does not involve the creation of a new mortgage contract. Instead, a bank mortgage modification modifies the current mortgage contract. You and your mortgage lender must agree on the modification before it can take effect.  

The purpose of a mortgage modification is to make the monthly mortgage payment smaller and therefore more manageable for the homeowner. The Federal Trade Commission lists the following common types of bank mortgage modifications:

• Lowering the interest rate on the loan
• Changing the type of interest rate (from fixed to variable or variable to fixed)
• Extending the duration of the loan (for example changing the loan duration from 15 to 20 years)
• Adding missed payments to the balance of the loan
• Reducing the amount owed on the loan through debt forgiveness and cancellation

How Much Does A Bank Mortgage Modification Cost?

There are two ways to get a loan modification.

The first is to pay a company to negotiate a loan modification with your mortgage lender. If you choose this option, be wary of companies that charge an upfront fee to go after the loan modification. This is illegal according to the Federal Trade Commission. Instead, make sure that you do not pay any fees until you have a written loan modification offer from your lender.

The second option is to directly negotiate with your mortgage lender. You generally don�t have to pay any fees for this. Keep in mind that you may be able enlist the free help of a nonprofit agency approved by the Department of Housing and Urban Development to help with the negotiation.

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Dan Humphrey

TAD45.com