Comparing the Best Loan Modification Deals
Once you’ve decided to resort to a loan modification, you should be very cautious with regards to the terms and deals you try to negotiate with the lender. Loan term, rate, balance, and penalties can be adjusted for the purpose of saving your home and avoiding foreclosure.
Steps on comparing loan modification terms
It would be very helpful if you check the different terms underlying your loans to be able to compare loan modification terms offered by various lenders. The following is a guide on comparing modification deals:
Step #1: Study the interest rate.
Based on Obama’s new plan, the lender would need to reduce interest rate to as low as 2%, with the aim that payment should not be more than a certain percentage of the borrower’s monthly income. Find out which deal can give the lowest interest rate.
Step #2: Compare the loan terms that your lenders can offer.
If the lowered interest rate is not low enough to meet the 31% threshold in payment decrease, extending the loan terms can be the next option. Extension can reach up to 40 years, depending on the lender.
Step #3: Take note of the principal balance.
Negotiate if the lender would be willing to defer principal balance.
Step #4: Find out more about cash incentives.
Also incorporated under Obama’s loan modification plan are cash incentives to encourage participation. Servicers and borrowers are both entitled to cash incentives. The former receives a certain amount as long as the latter continues to make payments, but neither will receive the incentives until loan payments are made for at least three months.
Step #5: Consider your capacity to meet payments.
As a whole and having considered all the terms, assess your financial status to see which terms you can meet.
Making the right choice
Your mortgage problems won’t be resolved if you fall prey to opportunists and loan scams. The success of saving your home through loan modification all boils down to careful analysis of the different modification deals and choosing what’s best for you.
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