If you are having a lot of difficulties making your monthly mortgage payments, you might be able to find some relief by refinancing the loan or getting a loan modification. These two options typically offer similar results, but there are several differences that you will need to know about before you decide which option to use.
How each method works
The main difference with these two methods is the way they work. Refinancing a home loan involves finding a lender that will give you a new loan for your home. The new loan will be used to pay the original loan off in full, and you will have to begin making payments to the new lender.
A loan modification is handled through your current lender, and your current lender will have to approve it. When you get a loan modification, you will not get a new loan. You will keep the same loan you have, but the terms of the loan will change.
Your credit will matter
One big thing you should realize about these options is what each option is really designed to do. A loan modification is designed to help a current homeowner keep his or her home during a hard time in life. In many cases, people who get loan modifications are behind on their monthly payments and do not have great credit.
Refinancing is typically done as a way to get a lower interest rate on the loan, and to qualify for refinancing you will usually need good credit. If you are behind on your mortgage payments, there is a good chance you may be behind on other payments, and this probably means that you do not have great credit. If this is how your situation is, your only option might be to apply for a loan modification.
One option might be better than the other
Both of these methods are good for people that want to pay less on their homes, but you might only be able to use one option or the other. This will basically come down to your personal situation. If you have good credit, refinancing is probably the best option. If you have poor credit, asking your lender to modify your loan would probably be a more realistic way to handle your financial issues.
If you have any questions about either of these options, you should contact a lender like Assurance Financial.
Share2 September 2016
When it comes to borrowing cash for a new house or a nice car, how much money do you really need? Although you might be tempted to mortgage yourself to the brim or borrow a little more than you should, the fact of the matter is that everyone has financial limits. My blog discusses the impact of borrowing more than you need, so that you can make smarter decisions with your money. In addition to keeping you out of trouble, this valuable information might also improve your quality of life and protect your financial future. You never know, it could make all the difference.
