A lot of my short sale clients have either considered a mortgage modification or been turned down for one by the time they have made the decision to move forward with a short sale.
WHAT IS A LOAN MODIFICATION?
In a mortgage modification the lender makes permanent changes to the terms of your home loan resulting in a more affordable payment. Keep in mind that while a modification will reduce your payment, it will not reduce the amount you owe on the property. In fact, in many instances the amount you owe on the loan will actually increase the amount or length of your loan.
This is the main reason most mortgage modifications ultimately fail. Loan modifications are not a long term solution for anyone who owes more on their home than their home could sell for (owners with negative equity).
IS A LOAN MODIFICATION RIGHT FOR YOU?
A loan modification may be a good solution for those who:
- Can not afford the current mortgage payments
- Wish to avoid Florida foreclosure
- Have a stable financial situation (including steady employment) to support the new payment amount indefinitely
- Do not have significant negative equity in the home, or are prepared stay in the home for many more years to overcome a heavy negative equity situation
If you owe much more than your home could presently sell for (or will after a modification), and believe there is a possibility you may want to move within a few years time, a loan modification is not likely to be a good long term solution for you.
A better alternative in this case is almost always a short sale.
Article adapted from: https://reidrealestategroup.com/should-i-modify-my-loan/
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