When people are struggling to pay their mortgage and facing the prospect of default, they may look to any one of a number of methods to avoid foreclosure. For some of those people, a mortgage modification may be exactly what they need in order to deal with their difficulties paying down their debt. But what is a mortgage modification, and when should you get one?
What is a Mortgage Modification?
In simple terms, a mortgage modification is a form of loss mitigation intended to prevent homeowners who are behind on their mortgages from losing their home. Instead of going into foreclosure proceedings, the lender and the borrower come to an agreement to modify the terms of the mortgage. Just as an example, reducing monthly payments while allowing the borrower to pay over a longer period of time, or they may adjust your interest rate to reduce the size of your monthly payments overall.
How Does a Mortgage Modification Work?
In theory, a mortgage modification is simply a contract between a mortgagee and mortgagor that allows the mortgagee to change the terms of their mortgage without needing to refinance. The legal technicalities can be fairly complex, though, and requires getting into the details of the mortgage contract itself. However, this can only be done with the consent of the mortgage lender, and lenders will generally not agree to modify a mortgage without signs of serious financial distress.
What Are the Benefits of a Mortgage Modification?
The biggest benefit of one of these modifications is it can allow you to maintain your current mortgage without going through the difficulty of refinancing, which effectively involves taking out a new mortgage to pay off your old one. This can help you to preserve your credit while also avoiding the risk of foreclosure. That means you can stay in your home, keep your current mortgage, and more easily manage your financial burdens.
When Should You Get a Mortgage Modification?
As a general rule, you should consider seeking a mortgage modification if you are behind on your mortgage, or suffering economic difficulties that may make meeting your mortgage payments difficult. For many people in that situation, it can offer a preferable alternative to foreclosure. However, to know what benefits it can offer, and what other options you may have, you should speak to a lawyer with experience handling foreclosure cases.
At David J. Lorber & Associates, PLLC, we assist clients throughout New York who are at risk of losing their homes to foreclosure. We will explain your options and guide you in making the best decision for your circumstances. Call us at (631) 750-0900 or contact us online to schedule your Free consultation at our Setauket office.