Would you like to adjust the terms of your loan to be more favorable to you? Many people believe that once they have taken out a loan, that’s it – they have no opportunity to change it again. No matter what size of loan you have, however, this doesn’t have to be the case.
The process of loan modification allows you to update the terms of your loan to deal with new realities. Maybe you’ve lost your job and will not be able to pay monthly premiums you once did. Or perhaps you’re facing temporary expenses that make it hard to pay your current loan.
Whatever the case may be, pursuing a loan modification is much better than simply going into default.
Loan Modification as a Way of Avoiding Home Foreclosure
Though there are many situations where a loan modification might be sought, avoiding foreclosure is the most common and the most serious. Most lenders wish to avoid foreclosure, since they will face significant legal costs and a much more complex process for collecting the loan balance.
When loans are modified through mutual agreement, everyone benefits. The homeowner has the opportunity to maintain the home at a lower monthly premium. At the same time, the lender faces none of the uncertainty associated with finding someone else to assume the mortgage.
Generally speaking, loan modification includes two key goals:
- Make the new terms of the loan affordable for the lender
- Collect as much of the original loan amount as possible
Because of this, the current homeowner actually has a great deal of leverage in the modification process. However, better terms and a smoother modification are possible by teaming up with an attorney who understands the contractual obligations and limits of the lender’s power.
What Options are Available for Loan Modifications?
In most cases, there are three major options for modifying a home loan:
- Temporary or permanent reduction of the interest rate
- Extension of the payback period, usually to 40 years
- A deferral of principal, typically at 0% interest rate
Of these, principal deferral is the least likely. Most lenders do not have as much discretion to pursue this option because of fiduciary obligations to their shareholders. Also, it’s important to realize that loan modification is a long and complex process, even when the lender is cooperative.
Loan Modifications Florida Residents Stand Behind
If you’re looking for a loan modification lawyer that Miami-Dade locals trust, call First Legal at (954) 998-1488.