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Home Loan Modifications: Smart or Senseless?

Are home loan modifications really a smart move or could they just sink you deeper underwater?

Advertisements make home loan modifications sound like the best thing since the lottery was invented. Stop paying your home loan and wait for your lender to give in, slash the amount you owe and give you a new better than market interest rate, right? Not exactly.

For those who really want to keep their homes, have suffered a unique set back which they have now recovered from and don’t mind fighting their way back to the surface with their equity home loan modifications can be a great blessing.

Home loan modifications can help homeowners get back on track, lower their interest rates and stay in their dream homes. However, principal balance reductions aren’t given to everyone and when they are they are normally not that significant.

Know that in order to qualify for a home loan modification you must be able to prove a hardship and yet now be employed and prove that you are able to keep up with new payments.

However, those who do qualify for home loan modifications don’t always find them as helpful as they had hoped. Unfortunately, with the government trying to wipe out competition from third party loan modification companies, many home loan modifications become simply recapitalization agreements, rolling back into the loan past due payments and interest. Add to this taxes and insurance or being and some have found themselves being offered higher payments than before.

Why would you want to borrow more on a home that is already underwater and face a decade of no equity when you could buy the home next door for half of what you owe and actually enjoy growing appreciation?

Know that applying for a home loan modification does not stop foreclosure. Don’t be surprised if you are evicted even while your lender says they are still working on your modification. It happens every day.

Applying for home loan modifications may be a pre-requisite for being approved for other types of help but do not rely on them to solve the issue or stop pursuing other way to stop foreclosure. You may be able to sell your home for cash in just a few days and walk away with some money in your pocket!