The Mortgage Modification Option

Modify Your Mortgage

This is a very difficult time for many homeowners. With high housing prices a few years ago, many people chose adjustable rate mortgages in order to be able to qualify for a house they wanted to purchase. Low interest rates made it possible for these higher-priced homes to be affordable for many people who may not have been able to afford them otherwise. At the time, house prices were rising quickly, so it was common that people who purchased a house found that the value of their home increased substantially over the course of just a few months. Mortgage companies also came out with additional programs that allowed even more people to qualify for loans that they may not otherwise be able to afford.

All of these factors combined to create what was called a housing bubble, which eventually popped. Interest rates rose. House prices dropped. Many people who had opted for two- and three-year ARMs saw their mortgage payments go up, often so much that they could no longer afford them. Foreclosures increased and are continuing to do so. Many mortgage companies have ceased operations or had to lay people off, leaving thousands of people jobless.

For people who have equity in their homes, and have been in their homes long enough, refinancing is an option that many people have been able to take advantage of.

If, however, you purchased your home at a time when prices were at their peak and now owe more on your home than it's currently worth, or if you haven't been in your home long enough, you may not qualify for refinancing. In this case, you may think you don't have any options. Some people in this position think that their only option is to sell their home for much less than it's worth or lose it through foreclosure.

There is an option that many people in these desperate financial circumstances don't realize exists. It's called a mortgage modification.

A mortgage modification is an option that you can request through your current mortgage company. You aren't refinancing to a whole new loan. You are asking for a modification of your existing loan. Not all mortgages can be modified, so you will need to discuss this with your mortgage company.

One way that some mortgage companies will modify your mortgage is to arrange what is called a forbearance, which means they will allow you to skip a payment or two. This is something that some mortgage companies will agree to if you're having temporary financial difficulties, but can get back on your feet quickly.

Another way that some mortgage companies will modify your mortgage is to extend the loan for another five years. This will help to lower your monthly payments.

You can also ask if they would be willing to adjust the interest rate if your adjustable rate mortgage is getting ready to reset.